Equity Rebound Continues Despite Mixed Retail Sales

WHERE WE STAND – A positive start to the week in terms of risk sentiment, yesterday, though it did rather feel like the ‘calm before the storm’ given the bumper docket we have ahead.

That includes, of course, the Trump-Putin call today, as well as five G10 central bank decisions, plus earnings from the likes of Micron and FedEx, in addition to a fairly busy data docket. On top of all that, the threat of Trump tape bombs continues to loom large, with the outlook liable to shift depending on whatever the President’s next Truth Social post says, while uncertainty surrounding trade policy shows no sign of dissipating. With all this to consider, it’s not particularly surprising that conviction among market participants remains rather lacking.

In any case, yesterday did bring our latest read on the health of the US consumer, in the form of last month’s retail sales data. The figures were, truthfully, a mixed bag, and will do little more than reinforce one’s priors.

Those expecting a US economic slowdown will point to softer than expected headline sales growth, at just 0.2% MoM, along with the prior print being revised lower to -1.2% MoM, as signs they hold the correct view. Meanwhile, those betting on the continued resilience of the Stateside economy will point to a better-than-expected control group print, at +1.0% MoM, along with a firm ex-autos & gas metric, the former of which should limit the negative impact on Q1’s GDP figures from the data.

As a result, there doesn’t seem much to be gleamed from the data on the whole. The figures clearly won’t be enough to allay ongoing growth concerns, particularly with downside risks to the outlook remaining intense, amid existing tariffs, and those set to go into effect from 2^nd April.

Anyway, for those wanting a real recession indicator, how about this one; LA-based finance workers selling their gilets on the Terminal’s POSH <GO>. Times must be tougher than we thought on the west coast!

Given those lingering growth worries, I still see equity rallies – of the kind seen in the last couple of sessions – as selling opportunities, with the near-term path continuing to lead to the downside, especially as neither economic nor earnings growth expectations have re-rated lower to an adequate degree just yet. This tactically bearish view is reinforced by both Commerce Secretary Lutnick and Treasury Secretary Bessent continuing to ‘roll the pitch’ for a slowdown, and noting their lack of concern with recent equity downside.

In short, there’s no ‘Trump put’ right now, and there’s certainly no ‘Fed put’ either, given the current inflationary backdrop. A rocky few months likely awaits, probably until the autumn, by which stage it will become difficult for the Trump Administration to blame economic ills on Biden & Co. who came before them. Doubling-down on the ‘short-term pain, for long-term gain’ strategy seems to be the plan for now.

On that note, for those wondering when to buy the dip in equities, I’d argue that such a strategy is less contingent on a specific level, and more contingent on a change in the way that policy is being conducted. A more coherent trade, and economic, policy agenda from the White House, that actually remains consistent, would certainly be something that I’d like to see before calling a market bottom, while there is also the possibility of J-Pow riding to the rescue before then in any case. Given the macro backdrop, though, the former is obviously much more likely, though we’re clearly not anywhere near that stage yet.

Elsewhere, yesterday, the greenback continued to drift lower, as participants continue to avoid the asset most acutely exposed to the tariff theme, and growth slowdown narrative. I remain bearish on the buck, here, with the market residing firmly in the middle of the ‘dollar smile’ at this juncture, and that bearish view further reinforced by other blocs – such as Europe – finally getting their fiscal act together.

These dollar declines came as Treasuries traded in firmer fashion across the curve, with gains led by the long-end. I continue to like the risk/reward of a bullish bonds position here, as growth expectations rollover, and as dovish risks to the Fed outlook mount.

Meanwhile, the yellow metal continues to shine, having broken north of $3,000/oz intraday for the second time on Monday. There is, unsurprisingly, plenty of congestion here, with gold suffering from the ‘round number curse’, as participants take profit at the big figure. Still, once we eventually break free from this temporary spell in purgatory, the bulls should wrestle back control, as haven demand propels gold to the upside.

LOOK AHEAD – A few bits and bobs on the docket today to provide some intrigue, with focus falling primarily on any developments from the aforementioned Trump-Putin chinwag.

Away from that, the latest ZEW sentiment surveys are due from Germany, with the expectations gauge seen climbing to 48.3, from a prior 26.0, which would be the index’s highest level since February 2022. I guess that’s what 500bln EUR of defence spending gets you!

Across the pond, as the FOMC begin their 2-day policy meeting, the latest housing starts, building permits, and industrial production figures are due, though none of that is likely to be especially market-moving. Last month’s Canadian CPI data could be, though, with inflation seen rising to 2.2% YoY, and markets pricing an April BoC cut as a coin-flip.

Finally, $13bln of 20-year Treasuries will be sold later today, while the Bank of Japan are set to hold the policy rate steady overnight, during the APAC session.