After a busy week in the US, attention shifts to Europe with the second round of the French elections on Sunday.
Here’s what to watch in the coming days.
Four separate polls give fervent EU supporter and political novice Emmanuel Macron a 24-point lead over Marine Le Pen, who has proposed pulling France out of the EU. Markets are also expecting a win for Mr Macron.
“If Macron stays clearly ahead of Le Pen in opinion polls, the focus will shift to the ‘third round of the presidential election’, the June parliamentary election,” said Thomas Nilsson at SEB. “A French president is strong only if he or she has majority support in parliament, so political manoeuvring and deal making after that election will be vital to the new president.”
However, a win by Mr Macron would help shift attention back from politics to the European Central Bank, which is beginning to tighten monetary policy.
The Sohn Conference gets underway in New York on Monday, bringing together some of the most closely followed investors who often discuss their latest investment ideas. This year’s attendees will get to listen to and swap ideas with speakers including Greenlight Capital’s David Einhorn, Pershing Capital’s Bill Ackman and DoubleLine Capital’s Jeffrey Gundlach.
Bank of England
The Bank of England is expected to leave interest rates unchanged when it meets on Thursday, with blackout rules in place ahead of the election campaign.
“2017 growth will be revised down and inflation up, but 2018/19 will remain broadly unchanged as a lower yield curve/oil prices and a stronger currency help offset recent data surprises,” according to strategists at TD Securities. “Markets may respond to this hawkishly initially but Governor Carney will likely steer things back to neutral during the presser.”
As earnings season winds down, it is retailers’ turn to unveil their latest results. The retail industry and department stores in particular have struggled amid rising competition from online competitors, threats from off-price chains offering discounted designer clothes and generally weaker tourist spending as a result of a strong US dollar.
With department stores moving to restructure their businesses, shutter stores and monetise their real estate, investors await the latest updates from the likes of Nordstrom, Macy’s and Kohl’s. Roughly 40 others companies listed on the S&P 500 will be reporting results next week including Walt Disney, 21st Century Fox and Whole Foods.
Following weak consumer spending data in the first-quarter GDP report, investors turn their attention to retail sales, which economists estimate rebounded last month to rise 0.6 per cent in April, from the previous month’s 0.2 per cent decline. So-called control sales, which strip out more volatile items like food, petrol and building materials, are projected to have cooled, with economists estimating a 0.4 per cent month-on-month rise, following a 0.6 per cent gain in March.
Investors will also turn their attention to inflation data. Consumer prices fell 0.3 per cent in March — their first decline in more than two years. Economists expect an 0.2 per cent increase in April. So-called core CPI is also expected to have climbed 0.2 per cent from the March, when it fell 0.1 per cent.
The data comes as the Federal Reserve has signaled it will continue to gradually raise interest rates. A string of Fed speakers are also expected to hit the speaking circuit next week. Speakers include New York Fed president Bill Dudley, Chicago Fed president Charles Evans, Dallas Fed president Robert Kaplan and Philadelphia Fed president Patrick Harker, all voting members of the monetary policy-setting Federal Open Market Committee.