Market Event, General

Week Ahead: What can we expect from the Fed's Beige Book?

Andrew Saks, Friday, 9 April 2021

Here we are, just one week on from what may go down in the annuls of history as the absolute worst stock market debut ever to have taken place on British soil, and a dichotomy has emerged between somewhat slow-moving currency markets and absolutely nervous stock investors.

Deliveroo, a company with a short but illustrious history of not only disrupting an already-established culinary scene at exactly the right time, but setting a global standard for its sector, would have looked to any observer as the absolute epitome of corporate excellence with an obvious route to public listing which would be a simple tick box exercise for even the most scrutinous auditor.

With all of the credentials to get it absolutely right, who would ever have guessed that it could go so wrong? Even the loyal army of delivery riders staged strike action on Wednesday on the first day that ordinary investors could buy and sell the company's shares on the stock market. If that doesn't indicate that even those not ordinarily associated with stock trading have a vested interest, who know what does!

The share price gained 2.5 per cent to £2.88 on the first morning of open trading following Deliveroo's initial public offering (IPO) but remained well below the £3.90 float price set. This points toward a very cautious entry into next week's share trading arena especially among stock executed at London's prestigious venues as during the week ahead seasoned traders may well look closely at this as an unexpected corporate faux-pas and therefore readjust how they view the security of looking at newly listed stocks, or how they may view their plans to take a speculative early trade in up and coming IPOs.

In other words, stock traders with the perhaps rare combination of an abundance of patience and a long term view may no longer wish to allocate funds they had reserved for making early purchases of newly listed firms, regardless of pedigree, as clearly anything can happen! Disastrous Deliveroo is therefore a confidence buster.

The 70,000 Deliveroo customers who bought parcels of shares costing between £250 and £1,000 felt it was worth getting behind an online enterprise which has served them well during the lockdowns.

With organic, ethically sourced egg now absolutely visible on the faces of Goldman Sachs, a series of corporate advisors, Deliveroo founder William Shu and non-executives such as Simon Wolfson, who arguably could have hosed down expectations, it was assumed by many that this combination had digital retail absolutely perfected and were far more astute than stuffy fund managers engaging in their current drive toward green and ethical investments to try to stoke the interests of an ever younger base of traders and a catatonic base of middle aged, middle class sophisticates whose eyes have glazed over at the prospect of bland assets, low volatility and potential government rulings on the environment.

By absolute contrast, the currency markets have been as steady as a cast iron girder this week, and focus has been away from the majors, as the aforementioned Deliveroo debacle unfolded and the high-profile demise of the Archegos fund took even Tier 1 banks and the associated senior executives involved who have now received their marching orders have dominated the news.

This may well change a little next week and it is worth looking out for any potential retraction of counterparty credit by large institutions that got burned by the $20 billion Archegos fire sale which has seen heads roll at some of the world's largest interbank dealers. Will they curtail counterparty credit as a reactive measure? It would not be the first time!

Cable may be the one to watch

GBPUSD could be the market to watch on Tuesday as we get Gross Domestic Product from the UK in the morning and US Consumer Price Index numbers in the early afternoon. Since the turn of the year, cable has traded between 1.35 and 1.40 barring a week in February where it unconvincingly traded above 1.40. With little reason for the USD to strengthen, a strong set of CPI figures could mean inflation is on the rise. The way central banks keep inflation low is by raising interest rates so those bulls holding long USD positions will be hoping for higher-than-expected figures putting the pressure on the Federal Reserve to raise rates stateside.

Will the RBNZ leave rates untouched?

Focus falls on the NZD overnight into Wednesday as we get an Interest Rate announcement from the Reserve Bank of New Zealand. Interest Rates have remained at record lows of 0.25% for just over a year now since the pandemic hit and central banks scrambled to slash interest rates to limit the economic impact. Short term interest Rates are important for determining the value of a currency and with no change expected at this meeting, traders will be focusing on the accompanying statement to see if the outlook leans to a more bullish or bearish view of the economic recovery.

Beige Book could move indices and USD

As we move into Wednesday evening, we see the release of the Fed's Beige Book. Many traders will not have heard of this and as an overview, it reports on the current economic situation in the United States taking onboard the views of market experts, economists and key business contacts and gives a picture of growth in the economy. US indices and the USD could see volatility on the release of this report.

The overnight data continues into Thursday morning with employment numbers from Australia which precedes high impact Gross Domestic Product figures from China. Being the world's second largest economy, this update could set the direction for financial market confidence throughout remainder of the week. Thus far, signs of economic recovery have bolstered markets instilling a bullish tone providing optimists with reasons to continue to push markets higher. Will we see a continuation of this sentiment? Or will we see a retraction in the economy prompting sharp profit taking?

German Consumer Price Index data could see a reaction in the Euro before the weekly Initial and Continuing Jobless Claims from the US accompanied by a Retail Sales update an hour before US market open.

On Friday at 12:30, the Canadian Dollar will be in focus, as Canada releases its employment report. After an impressive gain of 259,200 new jobs in February, job creation is expected to slow to 90,000 in March. The unemployment rate is expected to fall from 8.2% to 8.0%, potentially affecting the value of the Canadian dollar as salary settlements for overseas and US firms paying Canadian staff will be less than would have been predicted for the previous month.

As far as dichotomies go, this week ahead certainly shows a gulf the size of the Hoover Dam between volatility and confidence in stock trading and volatility - or lack thereof - in the currency markets.

All times indicated are BST.

Economic Calendar

(All times are BST)

Monday, 12th April

00:50 JPY Producer Price Index
00:50 JPY Bank Lending
10:00 EUR Retail Sales
10:00 EUR ZEW Survey – Current Situation
10:00 GER ZEW Survey – Economic Sentiment
15:30 CAD Bank of Canada Business Outlook Survey
19:00 USD Monthly Budget Statement

UK Company Announcements:

US Company Announcements:

Tuesday, 13th April
02:30 AUD National Australia Bank's Business Confidence
02:30 AUD National Australia Bank's Business Conditions
03:00 CNY Imports
03:00 CNY Exports
03:00 CNY Trade Balance
07:00 GBP Industrial Production
07:00 GBP Manufacturing Production
07:00 GBP Index of Services
07:00 GBP Gross Domestic Product
07:00 GBP Total Trade Balance
10:00 EUR ZEW Survey – Economic Sentiment
13:30 USD Consumer Price Index
13:30 USD Consumer Price Index Core
13:30 USD Consumer Price Index ex-Food & Energy
13:55 USD Redbook Index
21:30 USD API Weekly Crude Oil Stock
23:00 NZD NZIER Business Confidence

UK Company Announcements:
JD Sports
Plus 500

US Company Announcements:
Fastenal Company

Wednesday, 14th April
01:30 AUD Westpac Consumer Confidence
02:00 NZD RBNZ Interest Rate Decision
02:00 NZD Rate Statement
10:00 EUR Industrial Production
13:30 USD Import Price Index
13:30 USD Export Price Index
15:30 USD EIA Crude Oil Stocks Change
19:00 USD Fed's Beige Book

UK Company Announcements:

US Company Announcements:
JP Morgan Chase
Wells Fargo
Goldman Sachs

Thursday, 15th April

02:00 AUD Consumer Inflation Expectations
02:30 AUD Unemployment Rate
02:30 AUD Fulltime Employment
02:30 AUD Employment Change
02:30 AUD Participation Rate
02:30 AUD Part-Time Employment
03:00 CNY Gross Domestic Product
03:00 CNY Retail Sales
03:00 CNY Industrial Production
03:00 CNY NBS Press Conference
07:00 GER Consumer Price Index
07:00 GER Harmonised Index of Consumer Prices
13:30 USD NY Empire State Manufacturing Index
13:30 USD Philadelphia Fed Manufacturing Survey
13:30 USD Initial Jobless Claims
13:30 USD Continuing Jobless Claims
13:30 USD Retail Sales
13:30 USD Retail Sales Control Group
13:30 CAD ADP Employment Change
13:30 CAD Manufacturing Sales
15:15 USD Industrial Production
15:30 USD EIA Natural Gas Storage Change
23:30 NZD Business NZ PMI

UK Company Announcements:
Oxford Biomedica

US Company Announcements:
Bank of America
Taiwan Semiconductor Manufacturing Company
UnitedHealth Group
U.S. Bancorp

Friday, 16th April

07:30 CHF Producer and Import Prices
08:00 EUR EcoFin Meeting
10:00 EUR Consumer Price Index
10:00 EUR Consumer Price Index – Core
10:00 EUR Trade Balance
13:30 USD Building Permits
13:30 USD Housing Starts
15:00 USD Michigan Consumer Sentiment Index Preliminary
18:00 USD Baker Hughes US Oil Rig Count

UK Company Announcements:

US Company Announcements:
Morgan Stanley
PNC Financial Services Group
Bank of New York Mellon

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