Welcome to Michael Kramer’s pick of the top three market events to watch in the week beginning Monday 18 March.
Central banks will be in focus this week, with the Bank of Japan kicking things off with its meeting starting on Monday, followed by the rate decision on Tuesday. Speculation has been swirling that the BoJ may opt to lift rates out of a negative interest rate policy for the first time in years. As of 14 March, the market is pricing a 55% chance for a rate hike. However, the BoJ's unpredictable nature makes it a wait-and-see event.
Meanwhile, the more significant questions swirl around what the US Federal Reserve will indicate regarding its future path for monetary policy, while it isn’t clear when the Bank of England will start cutting rates either. Let's face facts: stocks have rallied in hopes of easing monetary policy in 2024. In earnings news, Micron Technology reports its second-quarter results after the close on Wednesday, and this stock has been a big hitter so far in 2024 thanks to artificial intelligence (AI) mania.
US Federal Open Market Committee decision & statement
Wednesday 20 March: Markets don’t foresee the Fed moving on interest rates yet, but investors will pay close attention to the "dot plot," also known as the summary of economic projections. This will give the markets a sense of how many cuts the Fed sees in 2024 and, perhaps more importantly, the longer-run neutral rate. There has been a lot of debate in recent months around the neutral rate and whether it’s genuinely higher than what the Fed has pencilled in, which could have a significant impact on rates and the equity markets. If the neutral rate is in fact higher, and the market has overestimated the number of cuts, valuations for stocks could prove to be too high.
Since 12 February, the Nasdaq 100 has basically stalled out, increasing less than 1%, despite all the AI hype. That means the considerable risk coming out of the FOMC meeting is a more hawkish-than-expected path for monetary policy. It would only take a drop of about 1.5% for the Nasdaq 100 to break a critical support level at 17,850, opening the path to much lower levels.
Micron Technology
Wednesday 20 March: Micron [MU] is expected to report a loss of $0.25 per share on revenue growth of 44.6% to $5.34bn. Meanwhile, adjusted gross margins are expected to be 13% for the quarter. Analysts are forecasting fiscal third-quarter revenue growth of 59% to $5.96bn and a profit of $0.21, with adjusted gross margins expanding to 21%.
Implied volatility for this earnings report is relatively high, with a 25-delta call for expiration on 19 April trading at 50%, and a 25-delta put trading at 47%. This indicates that traders are aggressively positioned for the stock to rise following the results. However, with call implied volatility so high, it may not be bullish, as call premiums are likely to decline faster than put premiums once the results are announced.
The stock appears to have strong resistance at $100, and a bump and run pattern is present, which is a bearish pattern, with multiple gaps to fill all the way down to support at $81. A failure for the stock to surpass $100 post-results could see it trade lower and return to support.
Bank of England rate decision & minutes
Thursday 21 March: Little is expected from the BoE, although markets are pricing in a full rate cut by the August meeting, and investors will be listening closely to whether the Bank is still on track to deliver that first rate cut by then. Any hints that it may be delayed or pushed back, or for that matter, pulled forward, will significantly impact the British pound, which has been strengthening lately versus the US dollar.
The pound has recently moved to the upper trading range around 1.28 to the dollar in recent days, but has been unable to maintain a breakout. If the BoE can maintain a more hawkish view and push back on the timing of rate cuts, despite the recent cooling wage growth figures, it may push the pound higher, confirming the breakout and potentially sending the pound to as high as $1.295. However, a more dovish statement from the BoE which confirms rate cuts are coming sooner probably means GBP weakens, potentially heading back towards the 1.25 area.
Key economic and company events
Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:
Monday 18 March
- China industrial production (Feb), retail sales (Feb)
- Eurozone consumer price index (Feb)
- Results: Marshalls (FY)
Tuesday 19 March
- Bank of Japan rate decision & statement
- Reserve Bank of Australia rate decision & statement
- Results: Close Brothers (HY), Tencent Music Entertainment (Q4), Trustpilot (FY)
Wednesday 20 March
- UK consumer price index (Feb)
- UK retail price index (Feb)
- US Federal Open Market Committee rate decision and policy statement
- Results: BioNTech (Q4), General Mills (Q3), Micron Technology (Q2), Prudential (FY)
Thursday 21 March
- Australia unemployment rate (Feb)
- UK public sector net borrowing (Feb)
- Eurozone purchasing managers' index (flash, Feb)
- UK purchasing managers' index (flash, Mar)
- Bank of England MPC minutes and rate decision
- Results: Darden Restaurants (Q3), Direct Line Insurance Group (FY), Next (FY)
Friday 22 March
- UK retail sales (Feb)
- Results: Accenture (Q2), FedEx (Q3), Nike (Q3), JD Wetherspoon (HY)
Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.
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