Breakfast Bites: Big day for Macro & Earnings

US GDP, ECI, PCE to be released. Meta and Microsoft after the close. BoJ rate announcement tomorrow

Apr 30, 2025

Rise and shine everyone

We have a big day ahead of us. The focus will be on the macro data before and during trading hours, and earnings from Microsoft & Meta after trading hours.

Let’s do a quick preview:

US QoQ GDP Growth Advance Estimate at 8:30 am ET: Expected to come in at 0.2%, although the consensus range is -1.5% to 1.1%. Atlanta GDPNow cast still shows -2.7%. We know that there has been quite a lot of imports being stocked ahead of the tariffs, and that’s likely to reflect in the numbers. The question is about gold imports and whether they will be treated as financial transactions or not. If they are, we could be looking at a positive number today.
Treasury Refunding Announcement at 8:30 am ET: We already have the total estimate number of $514B, which is $391B higher than the February estimate. Today we will get the breakdown of the tenors for the debt. Analysts expect the Treasury to maintain current auction sizes ($58B 3Y, $42B 10Y, $25B 30Y) and reaffirm steady borrowing for the coming quarters. GS doesn’t expect coupon sizes (longer term borrowing) to be upsized until Q3, 2026.
Employment Cost Index at 8:30 am ET: This is a quarterly measure of wages, and one that the Fed tends to watch. The estimate is for the index to remain unchanged at 0.9% QoQ and 3.8% YoY. We have come a long way from the peak, but we’re still above the long term average, and costs remaining sticky could keep core inflation sticky.

PCE Inflation 10 am ET: Inflation is expected to moderate slightly. A few things to consider, however, is that we have been seeing Prices Paid under PMIs starting to accelerate and these numbers may start to reflect some of that, although it may be too soon.

US Equity Futures are slightly lower this morning. Super Micro dropped 15% on a major earnings miss yesterday, dragging Nasdaq futures down 0.7% after hours and reversing the gains from an otherwise positive New York session. Markets are likely pensive about Meta, and Microsoft reporting after hours. Brief outlook from JPM:

Meta: Sentiment has soured on META amid FX downgrades, capex-driven FCF/EPS cuts, China tariff risks, and regulatory uncertainty. Long-term story intact, but near-term EPS risk and better hideouts elsewhere.
Microsoft: MSFT sees defensive interest on stable capex and limited tariff impact, but concerns linger around Azure momentum, Copilot uptake, and OpenAI exposure. Not a crowded long into earnings.

Global Macro - Chinese Activity Slumps; EA GDP Growth Accelerates

Chinese Manufacturing PMIs slipped back into contractionary territory.

Factory activity contracted for the first time since January and posted its sharpest decline since December 2023, despite Beijing’s ongoing stimulus efforts to support the economy amid escalating China-U.S. tariff tensions. Both output (49.8 vs 52.6 in March) and new orders (49.2 vs 51.8) slipped after gains last month, while foreign orders fell to their lowest level in nearly a year (44.7 vs 49.0).

GDP growth from the EA shows improvement:

Eurozone GDP Growth Beats Expectations: The Eurozone economy grew by 0.4% in Q1 2025, doubling the previous quarter’s pace and surpassing expectations, supported by easing inflation, lower borrowing costs, and fiscal stimulus—though risks remain from upcoming U.S. tariffs and weakened export outlook.
Germany Shows Fragile Recovery: Germany’s economy grew 0.2% in Q1, rebounding from contraction as inflation eased and confidence improved; however, annual GDP still declined 0.2%.
France Posts Tepid Growth: France eked out 0.1% growth in Q1, below forecasts, with flat household spending, declining investment, and falling exports despite a temporary U.S. tariff pause—underscoring lingering uncertainty over trade policy.

BoJ Preview

The Bank of Japan is in their two-day meeting with a rate decision expected early tomorrow morning (late night in the US). The BoJ expected to keep rates unchanged at its May meeting, with markets pricing in only a 2% chance of a hike They will likely take a wait-and-see approach until the fog of tariffs clears.

Tomorrow’s meeting also comes with the BoJ Economic Outlook with a new set of projections for 2027. With the JPY’s appreciation, we expect the CPI forecast for 2025 to be revised down. Governor Ueda is likely to deliver a balanced message, indicating that hikes are still on the table, but not imminent.

Market positioning in the JPY has become quite lopsided, favoring the longs. Positioning extremes could lead to a temporary decline in the JPY, i.e., the USD/JPY may bounce.