Overnight Headlines and Six Items for the Day Ahead

Market strategists at Nomura, including Pooja Kumra, highlighted the following five headlines overnight and said investors should keep they eye on the following six items for the day ahead:

Headlines

• Europe: First estimate of Spanish HICP inflation for May came in at 0.2% (Nomura: 0.2% y-o-y; Previous: 0.3%), while for that for Italy came in at 0.4% (Nomura: 0.6% y-o-y; Previous: 0.5%).
• Japan: Industrial production decreased in April by 2.5% m-o-m in response to the end of accelerated demand ahead of the consumption tax hike (Consensus: -2.0%).
• Japan: The all-Japan core CPI increased by 3.2% y-o-y in April, mostly reflecting the consumption tax hike (it increased by 1.5% excluding effects from the tax hike).
• Japan: Real household core consumption expenditures decreased by 4.6% y-o-y in April (Consensus: -3.4%)
• Korea: Industrial output gained 0.1% (sa) m-o-m in April (Consensus: 0.5%; Nomura: 1.5%) after increasing by 0.9% in March

The Day Ahead

• ECB publishes 3yr LTRO repayment amount for following week.
• India real GDP: Despite weakness in industrial activity, we expect real GDP growth to rise to 4.8% y-o-y in Q1 2014 from 4.7% in Q4 2013, led by the agriculture – higher winter crop output – and financial services sectors. On the demand side, we expect net exports and private consumption to improve, while investment spending is likely to languish. Overall, the data are likely to confirm that economic growth has bottomed.
• US personal income and spending: Weekly earnings for production and non-supervisory employees from the BLS employment report increased in April. Thus, we expect personal income to advance by 0.4% in April (Consensus: 0.3%), compared with 0.5% in March. Personal spending jumped by 0.9% in March, partly reflecting some realisation of pent-up demand after the brutal winter kept some consumers at home. Therefore, we expect to see slower growth in personal spending in April than in March. In addition, the 0.1% growth in retail sales in April provides a low baseline for the pace of personal spending. Lower heating demand in April due to warmer temperatures should also exert downward pressure on services consumption. Taking these factors into consideration, we forecast consumption to rise by 0.1% (Consensus: 0.2%). We expect the headline PCE price index to increase by 0.2% in April (Consensus: 0.2%; Previous: 0.2%), with a rise of 0.2% in the core index (Consensus: 0.2%; Previous: 0.2%).
• Chicago PMI: This index posted an outsized 7.1 jump in April, as activity in the Midwest region rebounded after a soft first quarter. The new orders and order backlog sub-indexes within this survey both increased and suggest that activity should be robust in at least the near term. In addition, other regional manufacturing surveys have been mostly positive this month. Taking these factors into account, we expect the index to remain elevated at 61.0 in May (Consensus: 61.0; Previous: 63.0).
• University of Michigan consumer sentiment: Consumer sentiment declined at the start of May as consumers were less optimistic about income growth. Consensus expects the index to post a slight increase to 82.5 at the end of May from 81.8
• Canada Q1 GDP (Consensus: 1.8% q-o-q; Nomura: 1.5%; Previous: 2.9%).

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