Central bankers and finance ministers meet for discussion as there are signs of recession in the US.
Many people think this is a week for the central bank, says Thomas Itzen, senior analyst at SEB.
The Spring Meetings of the International Monetary Fund and the World Bank will begin on Monday. This brings together central bank governors from all over the world, along with finance ministers, senior bureaucrats and some of the world’s leading economists.
– It’s the whole gang, one way or another, who’s going to talk. Itzen says that members of the Monetary Policy Committee of the European Central Bank, the Bank of England and the Federal Reserve will be giving speeches, and there will be leaks.
The International Monetary Fund will also present its economic outlook report on Tuesday. Here they report on the situation in the economy and give estimates for further growth.
The report is a very comprehensive work, but it is not a pioneering work. Because it’s so comprehensive, it’s usually a month or two behind the talking points in the market. Itzen says it’s still a great summary made by smart people.
There are a lot of data points coming this week. Thus, the overall story this week is the real economy versus the central bank economy.
The real economy is the production and consumption of physical goods and services, while the financial economy that central banks influence is more about determining the value of these goods and services, according to Itzen.
We have basically lived on our belief that the world finances and values securities. Then it turns out that the world is first and foremost material. Itzen says central banks can’t do much with this world.
Industry can disappoint
From the real economy, there will be several recent quarterly reports in the coming week.
There are consumer companies like Netflix, American Express, and Johnson & Johnson, along with banks like Bank of America. The SEB economist says it will be important to see how it goes.
According to Eitzen, analysts expect fairly high profits for most companies at the moment.
– I’m skeptical. I can imagine they don’t deliver the high that analysts expect, but investors think it’s good. I feel that the investor does not fully believe in analysts. Itzen says it’s unlikely that companies will be able to pass on all costs to consumers at the same time that they sell as many goods as they once did.
However, it is uncertain whether the inflationary effects will show up in the numbers from the first quarter, which is coming this week, or whether one should wait until the second quarter.
– Besides the quarterly numbers, the descriptive indicators come in a row for the week, says Eitzen, and refer to the PMIs for Europe and the US, which come out on Friday.
The specter of inflation may follow a stagnation
In the past two years, economists have been increasingly concerned about persistently high inflation. Itzen now points out that the conversation has become about whether it can end in deflation, i.e., that the prices of goods and services fall rather than rise.
– I watch the market closely for options on inflation, ie, insurance against inflation. There is now a record level of uncertainty about inflation. This may mean that you think it will either go higher or much faster. “I think the uncertainty will be important,” says SEB’s senior analyst.
In the same way that inflation tends to occur in times of boom, deflation tends to accompany purchases in times of deflation.
The “infallible index,” an inverted slope in interest rates, says there will be a recession in the United States. I even marvel at the lack of tension in the stock market when all the other markets are so nervous. So, this week’s corporate earnings will be worth watching. If companies provide numbers that are weaker than the market expects, that would be interesting, Itzen says.
Tesla quarterly results
One company that many will follow next week is Tesla. They report their first-quarter results on Wednesday.
The electric car maker announced in early April that it had delivered a record 310,000 vehicles in the first three months of 2022. There were about 2,000 more cars than in the last quarter of last year, and more than 125,000 in the first quarter of 2021.
Elon Musk confirmed in the update that the record delivery took place despite a global supply crunch and factory closures.
Tesla delivered a record number of cars in the first three months of the year
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