Ahead this week: FOMC decision reports, CPI/PPI data, Retail sales.
Market wise factors for the week Ahead
Eurozone
In what is anticipated to be one of the cycle’s final rises, the ECB is anticipated to raise interest rates by an additional 25 basis points on Thursday. With the inflation rate (including core) falling last month, the impetus on the central bank to continue is lessened, and markets are pricing one more in July but not totally. I anticipate it will emphasize that there is still work to be done and that rate cuts are not even being considered this year, but they might also hint that a pause is now a possibility.
UK
The CPI release the day before the 22 June meeting is the major pre-BoE data release, but the following week offers a variety of additional indicators that will garner a lot of attention. The most significant is the jobs report on Tuesday, with traders watching for any signs of a slowdown in wage growth and the emergence of slack in the labour market. The MPC will continue to tighten without it. Soon after the data is released, BoE Governor Andrew Bailey will testify before the House of Lords Economic Affairs Committee, which might provide some new insight. Also reported on Wednesday is the GDP.
China
A crucial week is coming up with a slew of crucial economic data releases and a decision on the PBoC interest rate.
The release of several credit conditions data for May, including new yuan loans, outstanding loan growth, and M2 money supply, will come first on Monday. According to consensus predictions, credit growth would slow, with outstanding loan growth falling to 11.6% from 11.8% in April, and M2 money supply declining to 12.1% from 12.4% in April.
Another batch of significant economic data will be released on Thursday, including the May housing price index, industrial production, and retail sales. Retail sales are predicted to grow at a slow rate of 13.9% year over year from 18.4% in April (its strongest pace since March 2021), industrial production is predicted to decline to 4.1% from 5.6%, and average new housing prices in China’s 70 major cities are predicted to rise slightly to 0.5% from -0.2% in April.
Japan
On Thursday, the statistics for the May balance of trade will be announced, and from the -JPY432.4 billion reported in April, a larger deficit of JPY1331.9 billion is anticipated. Export growth is predicted to slow by 0.8% year over year, which is a sharp change from the 2.6% increase that was observed in April, which was the slowest rate since a decline in February 2021.
The BoJ will reveal the results of its monetary policy meeting on Friday. The general assumption is that the ultra-loose policy will remain unchanged in light of Governor Ueda’s recent conflicting statements
US Weekly Schedule
The FOMC decision is the big event of the week, but before that, the May inflation report should demonstrate that inflation is slowing. As gasoline prices decline and demand destruction starts to show up in the data, pricing pressures should relax. The negative base effects begin to assist in bringing the headline inflation rate over the past year closer to 4.0%.
Although it is anticipated that the Fed would provide a hawkish skip, if inflation turns out to be too high, the Fed may decide to issue a rate rise instead. We may be on the verge of a close call with the rate decision, and dissent should now start to emerge. The US economy has remained robust for the majority of the year, but there are indications that it may be beginning to deteriorate. This “skip” might turn out to be a pause if authorities decide to postpone another rate increase. Wall Street appears to be certain that the tightening cycle is about to come to an end, but sticky inflation in the coming months might derail the market’s aggressive pricing of rate reduction by year’s end.
US events to watch
Stock Market
U.S. stocks have risen 20% from their October lows, defying concerns of a recession, a financial crisis, and skyrocketing Treasury yields – one definition of a bull market.
In the past, a 20% increase from the lows of a bear market signalled future stock price gains.
Despite worries about the possibility of a recession and persistent inflation, a megacap stocks surge, better-than-expected earnings season, and views that the Fed is reaching the conclusion of its rate-hiking cycle have supported U.S. equities so far this year.
“We’re seeing indications that the economy is going to be more resilient to headwinds,” Tim Murray, a capital market strategist in T. Rowe Price’s multi-asset division, told Reuters.
Revisions to Retail Sales
The Census Bureau will provide an update on U.S. retail sales on Thursday of the following week, providing information on consumer buying behaviours and how inflation has impacted them. U.S. retail sales probably increased by 0.5% in May after increasing by 0.4% in April and declining for the previous two months as consumers retreated due to inflation fatigue. While home furnishings and electronics showed declines in sales in April, online shopping and food were among the sectors that saw growth.
FOMC judgement
At its meeting on June 13–14, the U.S. Federal Reserve is anticipated to hold interest rates steady for the first time in well over a year, according to analysts surveyed by Reuters.
Having increased rates at each meeting since March 2022, Fed Chair Jerome Powell hinted in May that the American central bank would soon stop its cycle of rate increases to evaluate the effects of a historically aggressive 500 basis points of tightening.
The number of Americans submitting new applications for unemployment benefits has increased recently, which experts say indicates that the labour market is weakening amid rising recession fears. A pause in key rates is therefore eagerly expected.
Most recent inflation reports
We’ll receive the most recent Consumer Price Index (CPI) for May on Tuesday from the Labour Department. Since the CPI increased by 0.4% in April, it is anticipated that it will have increased by 0.2% in May. It is anticipated to register at an annual rate of 4.1%, down from 4.9% in the preceding month. The more stable core CPI, which does not include food and energy costs, is anticipated to have risen by 0.4% last month and 5.3% annually, down from 5.5% in April.
On Wednesday, the Producer Price Index (PPI), which measures wholesale inflation, will be released. After increasing by 0.2% in April, producer prices are predicted to have decreased by 0.1% in May. The annual rate is also predicted to decline from 2.3% to 1.5%.Fed’s Decision on Interest Rates
monetary policy decisions
The Federal Reserve will not be the only institution to publish its interest rate decisions; the European Central Bank and the Bank of Japan will as well. The ECB will decide on interest rates on June 15, and the BoJ will make its decision on June 16.
Given that regional inflation has remained persistently high, the ECB is anticipated to increase its benchmark interest rates by 25 basis points. BoJ is anticipated to keep its ultra-loose monetary policy while warning about inflation overshoot.
According to Dilip Parmar, Research Analyst at HDFC Securities, “The BoJ has a reputation for surprising markets; the same could be expected from the Federal Reserve this time.”
Global economic calendar for week ahead
Monday
Japan
Machine tools orders PPI (May)
Tuesday
USA
CPI Inflation (May)
Wednesday
USA
Fed interest rate Decision, PPI (May), API & EIA Crude oil Stock Change (for Week ended June9)
Euro area
Industrial Production (Apr)
Thursday
USA
Initial jobless claims( for week Ended june 10), US Retail Sales & Industrial production (May)
Euro Area
ECB interest rate decision, Balance of trade (Apr)
Japan
Balance of trade(May), Machinery orders (Apr)
China
Industrial production, Retail sales, House Price Index, Unemployment Rate (May).
Friday
U.S.A.
Consumer Sentiment
Euro Area
Inflation (May)
Japan
BOJ Interest rate decision
WEEKLY U.S. ECONOMIC AND EARNINGS CALENDAR
Monday
Events
No events
Earnings:
Oracle (ORCL), ECARX Holdings (ECX), and Streamline Health Solutions (STRM)
Tuesday
Events
NFIB Optimism Index (May)
Consumer Price Index (May)
Earnings:
Burford Capital Limited (BUR) and Motorcar Parts of America (MPAA)
Wednesday
Events
Producer Price Index (May)
Federal Reserve Interest Rate Decision
Earnings:
Anterix (ATEX) and Aurora Cannabis (ACB)
Thursday
Events
U.S. Retail Sales (May)
Empire State Manufacturing Survey (May)
Philadelphia Fed Manufacturing Survey (May)
Earnings:
Adobe (ADBE), The Kroger Company (KR), Lennar Corporation (LEN), Jabil (JBL), and Cognyte Software (CGNT)
Friday
Economic data:
Triple Witching
University of Michigan Consumer Sentiment Index, Preliminary Reading (June)
Earnings:
Nio (NIO)