Main factors:- This week’s focus will be on U.S. inflation data, retail sales data, and earnings results from major retailers, while the UK and China release closely watched economic data.
US Inflation Data
- Investors await U.S. producer and consumer price index data for signs of price pressure easing.
- Strong inflation led to fears of Federal Reserve not cutting interest rates this year.
- Fed Chair Jerome Powell indicated interest rate cuts.
- Analysts predict CPI report to show underlying inflation rising 3.6% year-over-year, the smallest increase in three years.
- Hotter-than-expected inflation could lead to rate cuts for the rest of the year, causing market volatility.
Retail Earnings
- April retail sales data and earnings from Walmart and Home Depot to be released on Wednesday.
- Bullish investors have gained confidence from a solid earnings season.
- Standouts include strong reports from tech and growth giants.
- Art Hogan, chief market strategist at B Riley Wealth, notes that strong earnings have made investors more comfortable.
- However, inflation trajectory remains a concern due to the expected Fed rate cut cycle.
China Economic Data
- China to release economic data for Q2 Q1.
- April home price data provides insights into property sector’s state.
- Property developers on the brink of collapse due to debt crisis.
- Industrial production, retail sales, and fixed asset investment expected to increase.
- Policymakers’ comments at Politburo meeting predict stimulus measures from Beijing.
UK Data:
- Bank of England closes to interest rate cut, but markets are divided on timing.
- Two sets of employment data and two inflation figures due before BoE’s June 20 meeting.
- First jobs report on Tuesday closely watched for signs of pay increases fueling price pressures.
- Expected average weekly earnings to rise by 5.9% in Q1, excluding bonuses.
- Moderate wage growth could boost June cut expectations.
Oil Prices
- Brent lost 0.2%, crude futures rose 0.2%.
- Expectations of higher U.S. interest rates have impacted oil prices.
- Stronger U.S. dollar makes greenback-denominated commodities more expensive.
- Rising U.S. fuel inventories pressure oil prices.
- China imported more oil in April than last year, indicating growth.
- Energy traders will consider inflation data to determine future interest rates.
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Investors await Tuesday’s U.S. inflation data to gauge Fed interest rate cuts, with February’s consumer price index expected to rise 0.4% after a faster increase of 0.3% in January.
Fed Chair Jerome Powell indicated that a rate cut may be appropriate this year, but he and his team are not yet prepared. Market observers will also be examining February’s retail sales data, which is expected to rebound 0.8% after a similar decrease a month earlier.
The economic calendar also features updates on industrial production, consumer sentiment and weekly data on initial jobless claims.
Fed officials will be entering the traditional blackout period ahead of their upcoming meeting next week.
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