The week has gotten off to an ominous start with equity markets giving back some of last week’s gains. Now that we have gotten past the bank stress tests and the ECB rate decision it appears that the focus has returned to fundamentals. Therefore, this week’s releases may have significant sway over risk appetite.
Today [B]Fed Chairman Ben Bernanke[/B] will speak about the stress tests and his comments could add to the confidence that the report generated. Tuesday will put the spotlight on the U.K. with the Trade Balance Report, [B]Industrial Production[/B] and the [B]NIESR GDP estimate[/B]. Although, forecasts are calling for a 0.9% decline in activity for March, an increase in April growth could offset its impact. However, if the GDP estimate shows that the economy is continuing to contract at its recent pace, we could see U.K. trade heavy. Wednesday will bring the most volatility as the [B]BoE Quarterly Inflation Re[/B]port will be released. The continuation of falling prices will diminish the outlook for company profits lowering analyst’s valuations. Additionally, we will see the [B]U.K.[/B][B] labor report[/B] which is expected to show jobless claims rose by another 85K, which should dim the outlook for domestic growth. In Japan the [B]Eco Watchers Survey[/B] which polls business cycle sensitive workers like cab drivers will give insight into the Japanese economy. Expectations are for a small improvement to 30.0 from 28.4. The biggest release of the week may be the [B]U.S. Retail Sales [/B]report as the world is looking toward a U.S. recovery to lift the global economy. Consumer spending in the U.S. accounts for the majority of GDP and if we see continued weakness in demand it could spark concern over corporate profits and may push out expectations for an economic recovery. Also, watch for [B]initial jobless claims [/B]the following day, the weekly reading isn’t typically that market moving but following the labor report will put in focus. Thursday will also see [B]U.S. Producer Prices[/B] cross the wires and expectations are for a 3.9% decline on an annualized basis following a 3.5% drop in March. The release will be an early indicator for the next day’s [B]U.S.[/B] [B]CPI[/B] reading. Indeed, inflation in the U.S. is forecasted to decline by 0.6% in April which will keep alive deflation concerns and lower the outlook for profits. However, markets have started to move toward the argument that upside risks are the growing concern as the government pumps money into the system and a pick up in prices could raise concerns over future consumer spending. The [B]Empire Manufacturing[/B] and [B]U of Michigan Consumer Confidence[/B] readings are also out that day and have market moving potential as well.