Week Ahead: ECB speaks amidst vaccine pressure

Rate statements from the European Central Bank and Bank of Canada are this week’s big stories. Will we see any major policy tweaks? UK retail sales are also in focus as the country emerges from lockdown. Elsewhere, earnings season rolls on on Wall Street.

Vaccine rollout puts pressure on ECB ahead of press conference

Another month, another ECB press conference.

The European Central Bank is, again, unlikely to make any major policy changes this month.

Instead, we’re probably looking at how the bank plans on keeping things steady. The big issue facing economic recovery is still vaccine rollout throughout the EU. At least, it looks like a key concern for ECB bigwigs according to March 11th’s meeting minutes.

The minutes underline ECB council members’ feeling that near-term economic growth depends on how the pandemic evolves.

“Reference was made to the slow pace of vaccination compared with other parts of the world,” the minutes stated. “Questions were raised as to how realistic it was to assume that containment measures would be reduced as early as the second quarter. Weakness in activity might continue well into the second quarter and beyond.”

There is a feeling that persistently high Covid-19 infection rates across Europe, spread of mutant strains, and prolonged lockdown restrictions are negatively the bloc’s recovery. GDP growth may come in lower than previously forecast in the next quarter too.

That said, the base rate probably won’t rise. Keeping borrowing costs low for banks throughout the EU is also a top priority, as the recent ramp in bond yields colours policymakers’ decision making.

Governing council member and Dutch central bank president Klaas Knot has said he doesn’t want to see a run up on government bond yields, as this may lead to a tightening of economic conditions throughout the EU. As the bloc recently committed to increase its bond buying programme, this is something the central bank will be very keen to avoid.

Are policy tweaks ahead as Bank of Canada makes rate statement?

Another rate decision will be coming from the Bank of Canada this week. Chances are no major changes are coming to Canadian rate policy, but we might some tweaks.

One thing that is unlikely to change is the BOC’s policy rate, which is pretty much frozen at 0.25% until 2023 when economic slack is absorbed.

Instead, Canada’s central bank is exploring changes to its policy frameworks, including average inflation targeting, a dual mandate targeting employment and inflation together, nominal GDP targeting, and price-level targeting.

This comes after it appears consumers and banks are feeling calm, despite historically low interest rates.

“Overall, inflation has not become a bigger concern for Canadians, and the pandemic has not dramatically changed consumers’ views on inflation,” the BOC said in its latest quarterly survey of consumer expectations, published on April 12th.

“Canadians are cognizant that inflation hurts others differently,” Governor Macklem said. “That is informing our research agenda. We are working with Statistics Canada on getting measures of inflation that are targeted more to specific groups. That has come directly out of speaking with Canadians.”

One thing we do know is that the bank is considering tapering off its quantitative easing programme, so we may see a more concrete strategy regarding this with the latest rate statement.

UK retail sales look to post strong March gains

The UK has opened non-essential shops, so we’re probably bracing for a bit of a boom when April’s stats roll in. March’s month-on-month retail sales are reported this week, and indicators look like retail is still strong, despite the pandemic’s challenging conditions.

We can see two-year increases in the latest reports from the British Retail Consortium and KMPG monthly sales monitor. This report is released ahead of month-on-month stats which come out this week but will give an indicator to the state of the UK’s retail health.

For context, the IRC has decided to compare sales data from 2019 and 2021 due to the disruption caused by the pandemic in 2020.

UK retail sales increased 8.4% on a like-for-like basis from March 2019, when they had decreased 1.1% from the preceding year.

Over the three months to March on a two-year basis, in-store sales of non-food items declined 44.4% on a total and 44.0% on a like-for-like basis. This is worse than the 2019 Total average decline of 3.1%.

For March, the two-year like-for-like excluding temporarily closed stores remained in decline. This is probably to be expected. Until last week, UK non-essential shops had been shuttered, so the high street has pretty much been dead.

Online sales continued to grow quickly during March, the final month of lockdown 3.0. The BRC says almost 60% of sales were online during the month. IMRG, which is continuing to compare 2021 figures with those of 2020, says that in March, online sales were 71.7% up compared to the same time last year.

We’ll be able to see more on a month-by-month basis when data is released this week.

Wall Street earnings season rolls on

After the big banks kicked off proceedings last week, earnings season is in full swing on Wall Street. The large caps are circling, and they’re bringing reports with them.

We’ll be able to see with more clarity which companies continue to be pandemic winners, and which may have struggled in the tough conditions it threw up.

Amidst the large caps reporting this week are Coca-Cola, Johnson and Johnson, Intel, Netflix, SAP, and a host of others. See below for a roundup of the large caps sharing earnings reports this week.

Major economic data

Date Time (GMT+1) Currency Event
Tue 20-Apr 11.45pm NZD CPI q/q
Wed 21-Apr 2.30am AUD Retail Sales m/m
7.00am GBP CPI y/y
1.30pm CAD CPI m/m
  3.00pm CAD BOC Monetary Policy Report
3.00pm CAD BOC Rate Statement
3.00pm CAD Overnight Rate
3.30pm USD Crude Oil Inventories
4.00pm CAD BOC Press Conference
Thu 22-Apr 12.45pm EUR Main Referencing Rate
12.45pm EUR Monetary Policy Statement
1.30pm EUR ECB Press Conference
1.30pm USD Unemployment Claims
3.30pm USD US Natural Gas Inventories
Fri 23-Apr 7.00am GBP Retail Sales y/y
8.15am EUR French Flash Services PMI
8.15am EUR French Flash Manufacturing PMI
8.30am EUR German Flash Manufacturing PMI
8.30am EUR German Flash Services PMI
9.00am EUR Flash Manufacturing PMI
  9.00am EUR Flash Services PMI
9.30am GBP Flash Manufacturing PMI
9.30am GBP Flash Services PMI

 

Key earnings data

Date Company Event
Mon 19-Apr Coca-Cola Q1 2021 Earnings
IBM Q1 2021 Earnings
Prologis Q1 2021 Earnings
United Airlines Q1 2021 Earnings
Tue 20-Apr Johnson & Johnson Q1 2021 Earnings
Proctor & Gamble Q3 2021 Earnings
Netflix Q1 2021 Earnings
Philip Morris Q1 2021 Earnings
Lockheed Martin Q1 2021 Earnings
Wed 21-Apr ASML Q1 2021 Earnings
NextEra Energy Q1 2021 Earnings
Anthem Inc. Q1 2021 Earnings
Canadian Pacific Railway Co. Q1 2021 Earnings
Ericsson Q1 2021 Earnings
Thu 22-Apr Intel Corp. Q1 2021 Earnings
AT&T Q1 2021 Earnings
Union Pacific Q1 2021 Earnings
Snap Inc. Q1 2021 Earnings
Blackstone Q1 2021 Earnings
LG Chem Q1 2021 Earnings
Volvo AB Q1 2021 Earnings
Fri 23-Apr Industrial & Commercial Bank of China Q1 2021 Earnings
Agricultural Bank of China Q1 2021 Earnings
Honeywell Q1 2021 Earnings
Bank of China Q1 2021 Earnings
PetroChina Q1 2021 Earnings
American Express Q1 2021 Earnings
Daimler Q1 2021 Earnings