Week ahead: Apple earnings + Fed and ECB look set to hike again

Earnings season rumbles on with Apple the headline event on Wall Street, but the major focus will be the two central bank decisions from the ECB and FOMC. The Federal Reserve is expected to raise rates by 25bps but is seen close to the end of its tightening cycle, whilst the European Central Bank has left another 50bps hike very much on the table.

Here are the week’s key events:

Monday

May Day holidays across Europe will keep trading conditions a bit thinner. Setting the tone for the session will be the official China manufacturing and services PMIs. A month ago, the Caixin private survey showed China's services activity in March accelerated at the quickest pace in more than two years. Meanwhile traders will look to see if there is any improvement from the US numbers for April after economic activity in the manufacturing sector contracted in March for the fifth consecutive month. Also keep an eye on the prices index, which slipped back into disinflationary territory last month.

Earnings:  Arista Networks (ANET), MicroStrategy (MSTR)

Tuesday

The Reserve Bank of Australia may resume interest rate hikes this month even after inflation cooled to 7%, its lowest in almost a year. The RBA was close to raising rates 25bps in April, minutes from the meeting showed, with the decision to pause apparently based on the need to see more incoming data. Minutes revealed policymakers still think inflation “remained too high and the labour market was very tight”. Eurozone CPI inflation, which declined sharply in March as energy prices receded, will also be monitored ahead of US JOLTS job openings.

Earnings: Pfizer (PFE), Advanced Micro Devices (AMD), Airbnb (ABNB), Ford (F), Starbucks (SBUX)

Wednesday

It’s all about the Federal Reserve as it concludes its two-day policy meeting, with markets pricing in a four-in-five chance the FOMC follows through with its third consecutive quarter-point rate hike. Such a move would bring the Fed funds rate to a range of 5%-5.25%, in line with its current central forecast for the peak in interest rates. The recent banking crisis may see the Fed look to be more cautious, whilst there has been evidence of disinflation, albeit core readings for price growth remain stubbornly high. Final hike? Markets only see a 10% likelihood of a further hike in June, with cuts coming by the end of the year, though this is not what Fed policymakers believe.

Earnings:  Barrick Gold (GOLD), Kraft Heinz (KHC), Etsy (ETSY), Qualcomm (QCOM), Uber (UBER)

Thursday

Next up it’s the turn of the European Central Bank, which seems certain to raise rates. The only question is whether it plumps for a 25bps or 50bps hike. Although headline inflation has declined due to energy base effects, core inflation has ticked up. Last week Executive Board member Isabel Schnabel said that “data dependence means that 50 basis points are not off the table”. Belgian central bank governor Wunsch said the ECB won't stop raising rates until core inflation and wage growth comes down, sees rates above 4%. Staff projections indicate growth picking up next year but inflation coming down all the way through to 2025 – both surely cannot be true unless the ECB really has been able to thread the needle.

Earnings:  Moderna (MRNA), Novo Nordisk (NVO), Shopify (SHOP), Apple (AAPL), Block (SQ)

Friday

Latest US labour market data will be front of mind by the end of the week. The jobs market remains in good strip despite a year of aggressive rate hikes, making it harder for the Fed to stop its rate hiking. Nonfarm payrolls increased by 236,000 in March, following a 311,000 gain in February. Swiss inflation data heads the European session, and the US Treasury currency report is also due.

Earnings:  AMC Entertainment (AMC)