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What mattered last week and a preview of the week ahead

What mattered last week:

  • U.S. stocks finished last week lower as an escalation in U.S.- China trade tensions resulted in the U.S. raising tariffs from 10% to 25%, on U.S. $200bn of imports from China on Friday.
  • President Trump threatened to increase tariffs to 25% on another U.S. $350 bn of imports from China. China has vowed to respond in kind.
  • Speculation that rising tariffs might persuade the Federal Reserve to cut interest rates, as well as optimism that a full-scale trade war can be avoided enabled stocks to rally back from their lows on Friday.
  • The ASX 200 finished the week near 6300, as investors remain cautious ahead of the upcoming Federal election and after the RBA elected to keep interest rates on hold at its monthly meeting on Tuesday.
  • In the currency space, despite the escalation in the trade war, the AUDUSD closed the week at .7000c.

For the week ahead, the key events are:

Australia: Home loans (Monday), NAB business confidence (Tuesday), Westpac consumer confidence and wage price index (Wednesday), labour force (Thursday), Federal election (Saturday).

  • Labour force (Tue): The labour market remains the key to a potential rate cut from the RBA. The market is expecting to see 14k jobs created last month and the unemployment rate to rise from 5.0% to 5.1%.

New Zealand: Business NZ PMI and PPI (Friday).

China: Fixed asset investment, industrial production, retail sales (Wednesday), house price index (Thursday).

Japan: Current account (Tuesday), machine tool orders (Wednesday), PPI (Thursday).

U.S.: Retail sales, manufacturing production, capacity utilisation and industrial production (Wednesday), NAHB housing market index, building permits, housing starts (Thursday).

  • Retail Sales (Wednesday): The expectation is for a 0.4% MoM gain in the retail control group after a 1.0% MoM rise in March. Headline retail sales are expected to rise by 0.2% MoM after a punchy 1.6% rise in March.

Fed Speakers on the wires this week include Rosengren, Clarida, George, Quarles and Williams.

U.S. Q1 2019 earnings season is in its final stages, with only 10% of S&P500 companies left to report.

Canada: CPI (Wednesday).

  • CPI (Wed): The expectation is for a 0.4% rise in headline CPI in April, which will take the YoY rate up to 2.0%.

Euro Area: EA industrial production, German ZEW economic sentiment index (Tuesday), German flash Q1 GDP, EA employment, EA Q1 GDP (2nd estimate), EA balance of trade (Thursday).

  • Germany Q1 GDP (Wednesday): After narrowly avoided two-quarters of negative growth in the second half of 2018, the market is looking for German Q1 GDP to rise by 0.4% in Q1.

UK: Employment (Tuesday).

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