This week, US equity markets experienced a subdued uptick, with the Nasdaq gaining 6.76% month-to-date (MTD), the S&P 500 rising by 3.89% MTD, and the Dow Jones adding a modest 36 points, or 0.09%. Traders are waiting with bated breath as they await inflation data, which could set the tone for the market’s direction in the upcoming months.
In contrast, the ASX 200 faced a slight decline after a hotter-than-expected inflation report for May. This has increased the likelihood of a rate hike by the Reserve Bank of Australia (RBA) before the year’s end. Despite this dip, the ASX 200 is on track for an 8% gain for FY 2024, or approximately 12.5% when dividends are included.
In the US, the Consumer Confidence Index (CCI) dropped to 100.4 from a revised 101.3 in May, indicating a slight dip in consumer optimism. Additionally, continuing jobless claims rose by 18,000 to 1,839,000, the highest since November 2021. This suggests a softening in the labour market, although not yet at alarming levels. Fed Governor Bowman reiterated that no rate cuts are expected in 2024.
Germany’s economic outlook is also showing signs of strain. The Ifo Business Climate indicator fell to 88.6 in June from 89.3 in May, reflecting diminishing business morale. The Consumer Confidence Index (CCI) declined to -21.8 for July, below the forecast of -18.9. This decrease points to a growing concern among consumers about the economic future.
Japan’s economy is grappling with a weakened yen, hitting its lowest level since 1986. This depreciation could impact the country’s import costs and overall economic stability, posing challenges for policymakers.
Australia reported a observable rise in inflation, with the monthly Consumer Price Index (CPI) increasing to 4% year-over-year (YoY) in May, surpassing April’s 3.6% and the forecast of 3.8% YoY. The RBA’s trimmed mean inflation also rose to 4.4% in May from 4.1% in April, reinforcing expectations of a rate hike.
In the commodities market, crude oil prices rose by 1.42% to $81.88 per barrel, reflecting ongoing supply concerns. Gold prices also saw a slight increase of 0.25% this week, reaching $2,327. Meanwhile, the Volatility Index (VIX) decreased to 12.25 from 13.19, indicating a temporary reduction in market uncertainty.
Looking ahead, several key economic events are on the horizon that could further influence market sentiment. In Australia, the upcoming RBA Meeting Minutes will be closely watched, especially after May’s higher-than-expected inflation data. Traders will be seeking clues on future rate hikes, which could impact economic forecasts and market sentiment.
In China, the Caixin Manufacturing PMI is expected to decrease slightly, reflecting a potential cooling in the country’s economic momentum. This could signal a slowdown in China’s recovery and impact global markets.
The Euro Area will be closely monitoring inflation data, which will be critical for the European Central Bank’s (ECB) next moves. A recent uptick in core inflation has already raised concerns, and the upcoming data will play a prominent role in shaping monetary policy.
In the US, several important events are scheduled, including the FOMC Meeting Minutes, which will provide insights into the Fed’s future rate plans. Recent signals have indicated fewer rate cuts than previously projected. Additionally, the Non-Farm Payrolls report will set the stage for economic expectations, with a forecast of 165,000 new jobs in June and an unemployment rate expected to remain at 4.0%.
