China-US trade and interest rates will grab the headlines this week with the Fed also taking centre stage after the yield on the key 10-year bond hit a seven year high of more than 3.1% last week.
Today is the deadline for finalising the list of Chinese products to be subject to tariffs and its also the deadline for the US Treasury to propose restrictions on Chinese investment in America.
Both could trigger another round in the continuing trade spat between China and the US, with collateral damage to President Trump’s ambitions for a summit next month with North Korea’s KimJong Un.
But we could also find that back channel talks have produced a settlement to the trade row, or President Trump might wake up grumpy on Monday morning and blow the whole process up.
Meanwhile the minutes from the last Fed meeting (out on Wednesday) and a speech by Fed people, led by Chair Powell (on Friday) are likely to confirm an upbeat view on the US economy and inflation and that it remains on track for more interest rate hikes with the next move in June.
Besides Mr Powell’s speech, a number of voting members of the Open Markets Committee will be speaking this week starting with New York Fed’s Bill Dudley and Lael Brainard will be speaking, but these are events that are not focused on monetary policy.
Two other voting members of the Committee in Loretta Mester and Raphael Bostic are giving speeches where monetary policy will get an extensive mention and their views on inflation especially will be watched to see if there is any change in current policy.
Two Fed surveys of manufacturing last week produced very bullish readings (and two more are due this week) and Dr Shane Oliver, the AMP’s Chief Economist reckons that a combination of the Fed minutes and the speeches are “likely to push the financial markets closer to factoring in another three hikes this year (from expecting just two).
This view will be helped by bullish results from the May business conditions surveys on Wednesday night. Home sales figures are out Wednesday and Thursday, home prices (on Thursday) and durable goods orders (Friday).
The US March quarter earnings season draws to a close with around 22 S&P 500 companies due to report this week with retail again dominating (see separate story).
In Europe, Eurozone business conditions surveys for May are also out on Wednesday and will be watched for any further signs of weakening we have seen this year, or where the recent weakness has stabilised.
The final estimate of German March quarter gDP will be issued along with the second estimate of UK GDP.
In Australia quarter construction activity from the Australian Bureau of Statistics will be issue don Wednesday with a rebound expected after the very weak December quarter.
Skilled vacancy data will also be released and a speech by RBA Governor Lowe (Sydney on Wednesday) are likely to affirm that the RBA remains comfortably on hold. He is giving a speech to the Australia-China Relations Institute.
There are a couple of profits out this week, the most important being Aristocrat Leisure, the pokie machine maker.
In South Korea a monetary policy decision from the central bank is expected late in the week while the latest Japanese trade data will be issued today. Taiwan’s final estimate of March quarter GDP is out on Friday.
The results of Venezuela’s polls on Sunday will be known later today. Nothing will happen with President Nicolás Maduro being re-elected to a second six-year term. That means the slow collapse of the Venezuelans economy (and especially its oil industry) will continue to the bitter end.
The next round of Brexit talks get under way in Brussels on tomorrow night, our time with UK prime minister Theresa May expected to confirm that Britain wants to remain tied to a customs union with the EU after 2021.
That will upset the hard Brexiteers, as well as many in the EU who want the question of a UK border with Ireland sorted out sooner rather than later – with no hard border involved.
