Welcome to Michael Kramer’s pick of the top three market events to look out for in the week beginning Monday, 4 March. A busy week is set to feature an ECB interest rate decision, earnings from major US retailers, and the non-farm payrolls print for February.
On top of all that, Britain’s chancellor, Jeremy Hunt, will deliver his 2024 spring Budget on Wednesday, outlining the UK government's spending plans and possibly announcing tax cuts ahead of a general election later this year. Traders will likely be following the announcement closely and watching for any potential market impact, particularly in areas such as UK gilts and GBP/USD. Plus, on Thursday the chair of the US Federal Reserve, Jay Powell, will appear before the Senate’s banking committee as part of a semi-annual hearing on the Fed’s monetary policy. While potentially headline-grabbing, the event is unlikely to be market-moving as Powell will probably refrain from saying anything new or different from what other Fed officials have said in the last couple of weeks.
ECB interest rate meeting
Thursday 7 March: While the European Central Bank is expected to leave interest rates unchanged on Thursday, the more important aspect of the announcement and subsequent press conference will be the messaging on the future path of monetary policy. The market has already started to price in rate cuts from the ECB, with swap rates implying three to four ECB interest rate cuts this year, the first of which is expected in June or July. Depending on how the ECB plays its hand, there could be an impact on the euro.
If the messaging appears dovish, and markets perceive that the ECB will cut rates before the Fed, the euro may weaken against the dollar. The relative strength index (RSI) for EUR/USD is trending lower but has not reached oversold levels yet, suggesting that the euro may have further to fall. Additionally, the euro is at the upper end of its Bollinger Band, which is serving as resistance. A move lower is unlikely to find support until the euro hits roughly $1.07, while a drop below $1.07 could lead to a decline to around $1.05. However, if the ECB comes across as more hawkish, EUR/USD could push above the upper Bollinger Band at $1.086 and advance back to $1.104.
Costco Q2 results
Thursday 7 March: Analysts expect Costco’s second-quarter results, due after US markets close, to reveal earnings of $3.62 per share on revenue of $59.0bn. Consolidated same-store sales (excluding fuel and currency exchange effects) are expected to rise by 4.65% overall and by 4.1% in the US. Market forecasts suggest that the Q2 results could boost Costco stock by 3.4%, which isn’t much. That’s partly because the Costco share price has already risen more than 50% in the past year and by almost 40% since 27 October, hitting an all-time high of $752.56 on 29 February.
Another factor that could limit the stock’s potential for gains, even if the results are in line with or better than forecasts, is an upcoming options deadline. A decent amount of call gamma has built up between the $770 and $790 strike price on options contracts that are set to expire on 15 March, which could act as upside resistance on the stock. More importantly, stocks that miss results have been punished of late, so given the Costco share price’s recent gains, an earnings disappointment would not be received well by the market.
US jobs report
Friday 8 March: Analysts estimate that the US economy added 193,000 jobs in February, down from 353,000 in January but continuing to underscore the strength of the country’s labour market. The unemployment rate is expected to have remained unchanged at 3.7%, while average hourly earnings are expected to have risen by 0.3% month-on-month, down from growth of 0.6% in January. Revisions to previously published figures will be something to watch as they have been a theme of job reports for some time. Analysts predict that the non-farm payrolls readings for the past two months could be revised upwards by as much as 126,000 jobs.
The jobs report is likely to impact US Treasury rates, especially with rates at the longer end of the curve. The 10-year Treasury yield hasn’t moved above resistance at 4.35%, and if it doesn’t break above resistance by the end of next week it may not head higher at all, with a move lower potentially sending it back to 3.9%. On the other hand, if there is a hot non-farm payrolls reading, and the 10-year does break out, it could increase back to 4.7%. The RSI is pointing higher, so, for now, it seems that the risk remains for rates to climb.
Key economic and company events
Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:
Monday
• Japan: February Tokyo-area consumer price index (CPI)
• Switzerland: February CPI
• Results: GitLab (Q4), Sea Limited (Q4)
Tuesday
• China: February Caixin services purchasing managers’ index (PMI)
• US: February Institute for Supply Management’s (ISM) services PMI
• Results: Ashtead (Q3), CrowdStrike (Q4), Greggs (FY), Target (Q4)
Wednesday
• Australia: Q4 gross domestic product (GDP)
• Eurozone: January retail sales
• UK: 2024 spring Budget
• US: ADP, JOLTS jobs data; Federal Reserve’s ‘Beige Book’
• Results: Legal & General (FY), Oxford Nanopore Technologies (FY), Tullow Oil (FY)
Thursday
• Australia: February trade balance
• China: January-February trade balance
• Eurozone: ECB interest rate decision and press conference
• US: Fed chair Jay Powell's semi-annual Senate hearing on monetary policy
• Results: Admiral (FY), Aviva (FY), Beazley (FY), Broadcom (Q1), Costco Wholesale (Q2), Darktrace (HY), Entain (FY), Harbour Energy (FY), ITV (FY), Kier (HY), Oracle (Q3), Rentokil Initial (FY), Robert Walters (FY)
Friday
• Canada: February employment data
• Eurozone: Q4 GDP
• US: February employment data, including non-farm payrolls
• Results: Informa (FY)
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.