Last week’s blow-up for consumer staples sunk the broader market, so all eyes will be on the latest quarterly earnings from Costco to see if there’s any good news out there. On the data front traders will be watching for US durable goods, EU flash PMIs and some key US inflation data. On the central bank front, it’s the turn of the Reserve Bank of New Zealand to raise rates. 

Economic data 

The economic calendar starts with the German Ifo Business Climate report on Monday. Last month’s report showed sentiment in the German economy stabilised at a low level. The Ifo Business Climate Index rose to 91.8 points in April, after 90.8 points in March, reflecting primarily less pessimism in companies’ expectations.  

Tuesday rolls in with a batch of flash PMI figures from the Eurozone, which are likely to reflect ongoing concerns about both input and output inflation. Wednesday is US-focused with durable goods orders and the latest FOMC minutes due out. Thursday is pending home sales and the second GDP reading from the US. The week ends on Friday with the core PCE inflation report – the Fed’s preferred inflation metric. Jay Powell last week suggested it could get quite hot. “What we need to see is inflation coming down in a clear and convincing way, and we’re going to keep pushing until we see that … If that involves moving past broadly understood levels of neutral, we won’t hesitate to do that… We will go until we feel we’re at a place where we can say financial conditions are in an appropriate place, we see inflation coming down… There won’t be any hesitation about that”. 

Costco Earnings 

Last week’s blow-up for consumer staples sunk the broader market. Earnings from Walmart and Target amounted to a red flag on the health of the consumer and helped send stocks on Wall Street to their worst daily decline since 2020. Target declined 25% as it warned on profit margins due to rising costs, a day after Walmart had hurt sentiment with a downgrade. Soaring freight, labour and fuel costs are hurting earnings. Discretionary spending is being hit badly due to inflation already and companies are hurting from not being able to pass it all on. 

Net income last quarter came in at $1.3 billion or $2.92 per diluted share vs $951 million, $2.14 per diluted share last year. Net sales for the quarter increased 16.1%, to $51bn from $44 bn last year. Ecommerce sales are growing around 13%. Investors will be watching for anything on raising prices and, in particular, a rise in fees. Fee increases have happened about once every five years, bringing this June into focus. “Stay tuned,” said CFO Richard Galanti on the last earnings call. 

RBNZ 

The Reserve Bank of New Zealand is the main central bank action this week. The RBNZ is set to raise interest rates by half a percentage point at each of its next three policy meetings, according to Westpac Banking Corp. However, RBNZ’s 2-year inflation expectations index showed a smaller rise than feared, nudging up to 3.29% in Q2 from 3.27%. Market pricing had indicated a very small chance of a 75bps RBNZ hike this week, but the consensus is for a 50bps hike at the May meeting. 

Earnings Season 

Major economic data