How bad is it? By Reuters

LONDON (Reuters) – Earnings season is in full swing, while the first snapshot of business activity in April could provide a sense of just how painful the turmoil in the banking sector has inflicted on the global economy.

China and Britain release major economic data and officials from the Group of Seven nations talk about climate targets.

Here’s a look at the upcoming week in the markets from Ira Yobashvili and Saqib Iqbal Ahmed in New York, Li Guo in Shanghai, Ray Wei in Singapore, and Alun John and Dara Ranasinghe in London.

1/ Low gains

Earnings season picks up in the US and the outlook looks bleak due to the regional banking crisis and the most stringent monetary policy tightening in decades.

In addition to major banks such as Goldman Sachs (NYSE: ), Morgan Stanley (NYSE:) and Bank of America (NYSE:): Big names reporting this week include Johnson & Johnson (NYSE:): Netflix (NASDAQ:) on April 18, and Tesla (NASDAQ:) on April 19.

Analysts expect first-quarter earnings to decline 5.2% year-over-year, Refinitiv I/B/E/S data as of April 7 showed. That would be followed by a drop in earnings in the fourth quarter of 2022, a cascading drop known as an earnings recession that has not occurred since the Covid-19 virus hit corporate results in 2020.

However, with the bar set lower, better-than-expected results, or optimistic guidance, could give stocks another boost. The S&P 500 is up about 6.5% in the year so far.

(Graphic: US Earnings Outlook – https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/znvnbjjgovl/earnings_outlook.jpg)

2/ Savior of the universe?

Flash PMIs (Purchasing Managers Index) for April were released globally on Friday, and real-time indicators of these business conditions can provide an idea of ​​whether the banking turmoil is indeed impacting activity.

The International Monetary Fund has just cut its global growth forecast and warned that problems in the financial sector mean the global economy is more likely to undershoot than to overshoot.

Purchasing managers’ indices should show if growth is slowing down, and if so, where in the world and how quickly. Questions quickly become a key driver for markets as central banks near the end of their rate hikes.

Traders are betting that the Federal Reserve will cut interest rates by the end of the year, a prediction based on a significant slowdown in the US in the second half.

Recent PMI data showed that activity in Europe has held up relatively well. Any lingering signs like this could keep European blue chips near 22-year highs.

(Graphic: GLOBAL MARKETS, but headwinds boost GLOBAL MARKETS, but headwinds boost – https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/lbvggwwjgvq/chart.png)

3 / Paul Noor Pir

China watchers are confused and upcoming data – including first-quarter GDP, March retail sales and industrial production – may leave them in a state of disarray.

Domestic inflation is muted, exports are rising and credit growth is strong. It could easily be argued that subdued inflation betrays a wary domestic consumer, that banks are forced to lend, and that the rebound in exports will be short-lived as external demand subsides and the likes of Apple (NASDAQ:) shift more production to Southeast Asia.

However, those holding on to a bullish reopening hypothesis expect more stimulus, and that could come next week as well, as a large batch of central bank medium-term loans is repriced.

In a sign of which way the authorities want lending rates to go, smaller regional banks have already cut deposit rates.

(Graphic: China’s Slow Recovery – https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/zjvqjaorbpx/T5_China’s%20slow%20recovery_updated.png)

4/ No alerts, no surprises

It’s an important week for UK data, with jobs numbers for February on Tuesday and inflation numbers for March on Wednesday.

Bank of England policymakers, who expect inflation to ease, may shy away from good news. Inflation unexpectedly rose to 10.4% in February, spurred by higher prices for food and drink in bars and restaurants, data that likely boosted the case for a rate hike in March.

Markets expect at least one price increase. Static inflation remains the obstacle to peaking rates, with food inflation at 18%, a level last seen in 1977.

Supermarket group Tesco (OTC:) has slashed the price of milk – a staple in Britain – for the first time since May 2020, a possible early sign that food inflation (and an inflationary headache for the BoE) is now likely to pick up. sandal.

(Graph: BoE Inflation Problems – https://www.reuters.com/graphics/BRITAIN-BOE/movayyabva/chart.png)

5/ Net zero energy crisis vs

The Group of Seven rich nations on Sunday set major new collective targets for solar and offshore wind power, agreeing to accelerate renewable energy development and move toward a rapid phase-out of fossil fuels.

But they stopped short of agreeing to the 2030 deadline for phasing out coal that Canada and other members have pushed for, and left the door open for continued investment in gas, saying the sector could help address potential energy shortages.

Meanwhile, geopolitical tensions are also in focus. Tensions between the US and China over Taiwan remain in focus, as Chinese President Xi Jinping seeks to boost combat military training.

(Graphic: How Climate Change Happened in 2022 2022, the Fifth Warmest Year on Record – https://www.reuters.com/graphics/CLIMATE-CHANGE/EU-SCIENCE/zgvobrbbxpd/graphic.jpg)