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By Noreen Burke
Investing.com — Earnings season is getting underway in earnest as Federal Reserve policymakers have one last chance to voice their views ahead of next month’s policy meeting. PMI data could point to the impact of the recent turmoil in the financial sector. Meanwhile, the UK and China release key economic data.
- winning season
Bank heavyweights started Friday with JPMorgan (NYSE:), Citigroup (NYSE:) and Wells Fargo (NYSE:) all beat expectations, benefiting from rising interest rates and easing fears of stress in the banking system.
The first quarter earnings season is in full swing next week, with results expected from several other big banks including Goldman Sachs (NYSE:), MorganStanley (NYSE:) and Bank of America (NYSE:) as well as a long list of companies including Netflix (NASDAQ:), Tesla (NASDAQ:), IBM (NYSE:) and Johnson & Johnson (NYSE:).
Analysts now expect first-quarter earnings to have fallen 4.8% from the year-ago period, according to data from Refinitiv on Friday. That represents a 5.2% year-on-year decline in the quarter compared to their forecast a week ago.
“While we don’t think the earnings season will bring much good news, expectations are low enough that we could see stocks holding back following the results,” wrote Gina Bolvin, president of Bolvin Wealth Management Group in Boston. in a Friday note.
- fed clock
Most investors believe the Fed will hike rates by another 25 basis points at its next monetary policy meeting on May 3, although minutes from the central bank’s March meeting did highlight the heightened risk of a recession later this year following the recent turmoil recognized in the financial sector.
Over the next few days, investors will have one last chance to hear from Fed officials before entering their traditional pre-meeting blackout period, including New York Fed President John, Gov. Michelle, Gov. Christopher and Gov. Lisa.
The US is also due to release data on , two regional manufacturing surveys, and the weekly report on , which economists expect will show a further rise amid an increase in layoffs since the beginning of the year.
- PMI data
The euro zone, US and UK are due to release PMI (Purchasing Managers’ Index) data on Friday and market watchers will be on the lookout for signs that the recent turmoil in the banking sector is already affecting economic growth.
Last week, the International Monetary Fund cut its global growth forecast, warning that troubles in the financial sector would mean the global economy is more likely to underperform rather than beat estimates.
The PMI data should show whether growth is slowing, and if so, how quickly. This question is quickly becoming a key driver for markets as central banks near the end of their tightening cycles.
Markets are betting on the Fed cutting rates by the end of the year, an expectation based on a sharp US slowdown in the second half.
- UK dates
The UK is due to release February data on Tuesday, followed a day later by March data that could determine whether Bank of England officials decide to hike interest rates by a further 25 basis points at next month’s meeting.
Inflation unexpectedly rose to 10.4% in February, fueled by higher food prices, data that likely underpinned the case for March’s rate hike. Economists expect inflation to return to single digits in March, but this would still be well above inflation rates in the rest of Europe and the US
While the British economy avoided a recession, growth stagnated last year.
Markets anticipate the BoE to hike rates next month from 4.25% to 4.5%, which would be the 12th straight rate hike since December 2021.
- China data
China is set to release a flurry of economic data on Tuesday, including reports for the first quarter, March and , with market participants hoping for more clarity on the uneven recovery in the world’s second-biggest economy.
While Chinese exports are rising and credit growth is solid, inflation remains subdued as the consumer and industrial sectors struggle to recover from the harsh pandemic-era restrictions.
Policymakers have pledged to ramp up support for the economy, which last year saw one of its worst performances in nearly half a century due to the severe COVID-19 restrictions.
–Reuters contributed to this report
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