The State of Markets: "Relief Rally Ahead?"
Bearishness in markets continued to build this past week. In particular, that was fuelled by poor price action, with the S&P500 breaking below its 200 day moving average on Monday. On top of that, US macro data was weak (e.g. Tuesday’s NFIB survey and Friday’s Michigan sentiment reading), and equities failed to rally meaningfully on Wednesday’s better than expected CPI print. There were also negative comments from a number of US companies (e.g. key retailers & airlines), as well as new tariff announcements from Trump.
The key questions currently, therefore, are: How long will this pullback last? And, is a relief rally about to start (if it hasn’t already)? Or, is there more near term downside ahead? The next key support levels on the S&P500, in that respect, are at 5,394 (September ’24 lows) and 5,334 (April ’24 highs) – see key chart below.
The main event this coming week is the Fed’s policy decision and press conference on Wednesday. While there’s no expectation of a cut at this meeting, the tone of Powell’s comments will be watched closely. Key US macro data this week includes retail sales (Monday), housing starts and building permits (Tuesday) and the Conference Board’s Leading Indicator (Thursday). Elsewhere other major central banks making policy decisions include the BoJ (Wednesday), BoE, and PBoC (both on Thursday). Please see below for a full list of data this coming week.
Key chart: S&P500 futures candlestick chart, shown with 50 & 200 day moving averages
Upcoming important data/events this week:
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Events: |
Fed policy decision (Wed, 6pm) followed by press conference (6:30pm); Bank of England policy decision & minutes (Thurs, 12pm), followed by press conference (12:30pm); BOJ policy decision (Wed, time tentative); PBOC policy decision (Thurs, 1am). |
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Monday: |
US retail sales (Feb, 12:30pm); US NAHB housing market index (March, 2pm). |
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Tuesday: |
US housing starts & building permits (Feb, 12:30pm). |
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Wednesday: |
N/A |
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Thursday: |
US existing home sales (Feb, 2pm); US Conference Board leading index (Feb, 2pm). |
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Friday: |
Eurozone consumer confidence (March first estimate, 3pm). |
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Key earnings: |
Accenture, Nike, Micron (Thurs). |
Key Research
Quarterly Asset Allocation Update No. 61, 13th March 2025:
“Europe: Coming Back to Life”
Many in markets expect slow growth in Europe over coming years. Their concerns are wide ranging and include the impact of tariffs; political challenges; shrinking populations; the recession in Germany (which is arguably spreading to France); inflexible labour markets; and the ongoing negative impact from a weak Chinese economy, amongst others. That mood was summarised by Lagarde at last week’s ECB press conference (see quote above).
The key question, therefore, is: Are the bears right? Will Europe continue to experience poor economic and earnings growth? Or – is it ‘coming back to life’?
Key North American macro data & events:
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Events: |
Fed policy decision (Wed, 6pm) followed by press conference (6:30pm); speech by the Fed’s Williams in the Bahamas (Fri, 1:05pm). |
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Monday: |
Canadian housing starts (Feb, 12:15pm); US retail sales (Feb, 12:30pm); US Empire manufacturing (March, 12:30pm); Canadian existing home sales (Feb, 1pm); US NAHB housing market index (March, 2pm); US business inventories (Jan, 2pm). |
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Tuesday: |
US housing starts & building permits (Feb, 12:30pm); US New York Fed service sector business activity (March, 12:30pm); Canadian core CPI (Feb, 12:30pm); US imports and exports price index (Feb, 12:30pm); US industrial & manufacturing production & capacity utilisation (Feb, 1:15pm). |
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Wednesday: |
US total TIC flows (Jan, 8pm). |
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Thursday: |
US Philadelphia Fed business outlook (March, 12:30pm); US current account balance (Q4, 12:30pm); US weekly jobless claims (1:30pm); US existing home sales (Feb, 2pm); US Conference Board leading index (Feb, 2pm). |
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Friday: |
Canadian retail sales (Jan, 12:30pm). |
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Key earnings: |
Accenture, Nike, Micron, Cintas, FedEx (Thurs). |
Fig B: US Conference Board leading index (Y-o-Y %)
Key European macro data & events
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Events: |
SNB policy decision (Thurs, 8:30am) followed by press conference (9am); Riksbank policy decision (Thurs, 8:30am); ECB publishes Economic Bulletin (Thurs, 9am); speeches by the ECB’s Rehn at MNI event (Tues, 9am), Villeroy in Paris (Wed, 10:45am), Guindos in Madrid (Wed, 12pm), Elderson in London (Wed, 1pm), Lagarde in EU Parliament hearing (Thurs, 8am), Lane in Cork (Thurs, 12pm), Villeroy in Paris (Thurs, 1pm) & Escriva at IESE banking event in Barcelona (Fri, 8:15am). |
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Monday: |
Spanish labour costs (Q4, 8am); Italian headline CPI (February final estimate, 9am). |
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Tuesday: |
German & Eurozone ZEW survey – expectations & current situation (Mar, 10am); Eurozone trade balance (Jan, 10am). |
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Wednesday: |
Eurozone labour costs (Q4, 10am); EZ headline & core CPI (February final estimate, 10am). |
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Thursday: |
German PPI (Feb, 7am); Eurozone construction output (Jan, 10am). |
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Friday: |
French INSEE business & manufacturing confidence (Mar, 7:45am); ECB current account (Jan, 9am); Italian current account balance (Jan, 9:30am); Eurozone consumer confidence (March first estimate, 3pm). |
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Key earnings: |
N/A |
Fig C: Eurozone consumer confidence (index)
Key UK macro data & events
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Events: |
Bank of England policy decision & minutes (Thurs, 12pm) followed by press conference (12:30pm). |
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Monday: |
Rightmove house prices (Mar, 12:01am). |
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Tuesday: |
N/A |
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Wednesday: |
N/A |
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Thursday: |
Employment, jobless claims & average weekly earnings (Feb/Jan, 7am); CBI industrial trends survey (Mar, 11am). |
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Friday: |
Gfk consumer confidence (Mar, 12:01am); public sector finances (Feb, 7am). |
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Key earnings: |
N/A |
Fig D: UK Rightmove house prices (Y-o-Y %)
Key Asia-Pacific macro data & events
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Events: |
BOJ policy decision (Wed, time tentative); PBOC policy decision (Thurs, 1am); speech by the RBA’s Hunter (Mon, 11:20pm); market holiday in Japan on account of Vernal Equinox (Thurs). |
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Monday: |
Chinese new & used home prices (Feb, 1:30am); Chinese activity data (industrial production, retail sales, fixed asset, property investment & unemployment rate – Feb, 2am). |
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Tuesday: |
Japanese Tertiary industry index (Jan, 4:30am); Australian Westpac leading index (Feb, 11:30pm); Japanese imports/exports, & trade balance (Feb 11:50pm); Japanese machinery orders (Jan, 11:50pm). |
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Wednesday: |
Japanese industrial production & capacity utilisation (January final estimate, 4:30am); Japanese machine tool orders (February first estimate, 6am). |
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Thursday: |
Australian employment data (Feb, 12:30am); Japanese headline & core CPI (Feb, 11:30pm). |
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Friday: |
N/A |
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Key earnings: |
Ping An Insurance Group (Thurs); China Shenhua Energy, China Petrol, Bank of Communications (Fri). |
Fig E: Japanese headline & core CPI (Y-o-Y %)
Last week:
Longview on Friday, 14th March 2025:
“Equity Pullback – What’s Next?”
Quarterly Asset Allocation Update No. 61, 13th March 2025:
“Europe: Coming Back To Life”
Global Macro Report, 10th March 2025:
“Japan: Is It Normalising? a.k.a. Five Key Problems”
Prior week:
Longview on Friday, 7th March 2025:
“Europe is Overbought; US is Oversold – Now What?”
Tactical Equity Asset Allocation No. 254, 5th March 2025:
“Pullback Underway –> & Likely Enduring a.k.a. 'Relief Rally’ Expected near term (But Temporary)”
The SHORT VIEW (& market positioning), 4th March 2025:
“Aussie Dollar: Upside Risks Brewing”