The US equity markets experienced a shake-up this week. A sharp sell-off in mega-tech stocks dragged down the Nasdaq and the S&P 500. However, a cooler-than-expected inflation update suggested a nearly certain 25 basis points (bp) Federal Reserve rate cut in September. Despite the tech slump, the anticipation of lower interest rates buoyed investor sentiment.
Conversely, the ASX 200 soared to a new record high of 7969.1, buoyed by expected US interest rate cuts and strong performance in consumer-facing property and financial stocks. With momentum on its side, the ASX 200 looks poised to break through the 8000 mark in the coming week.
Fed Chair Powell’s recent testimony to Congress took a dovish turn, which emphasised on the need for more evidence that inflation is retreating to target levels. He noted that the labor market “appears to be fully back in balance.”
The US Headline Consumer Price Index (CPI) fell by -0.1% month-over-month in June, bringing the annual rate down to 3.0%. Meanwhile, core CPI saw a modest rise of 0.1%, with the annual rate easing to 3.3%.
In the UK, the Bank of England’s Chief Economist Huw Pill highlighted ongoing concerns over high services inflation and wage growth, casting doubt on imminent rate cuts.
China’s economic data painted a mixed picture. The annual inflation rate edged down to 0.2% in June, while the Producer Prices Index (PPI) fell by 0.8% year-over-year, less than expected. These figures reflect ongoing challenges in sustaining economic momentum.
Australia’s economic indicators were a mixed bag. Westpac’s consumer sentiment index fell by 1.1% in July to 82.7, remaining in the “deeply pessimistic” range. Conversely, the NAB business confidence index surged to 4 in June from -2, indicating a rebound in business optimism.
The Reserve Bank of New Zealand held its official cash rate steady at 5.50%, with a dovish statement suggesting a cautious outlook.
Commodity markets saw some corrections. Crude oil prices dipped by 0.44% to $82.79 per barrel, snapping a four-week winning streak. Gold prices, however, rose by 0.70% to $2408 per ounce, reflecting ongoing investor demand for safe-haven assets.
China will release a slew of economic data on Monday, 15 July at 2.00am GMT. Q2 GDP growth is expected to slow to 5.1% year-over-year from 5.3% in Q1. Retail sales, industrial production, and fixed asset investment are also projected to show signs of easing, reflecting ongoing economic challenges.
US retail sales data will be released on Tuesday, 16 July at 12.30pm GMT, followed by building permits data on Wednesday, 17 July at 12.30pm GMT. These indicators will provide insights into consumer spending and housing market trends.
Then on Wednesday, 17 July at 6am GMT, the UK’s inflation rate will be pivotal in shaping expectations for future monetary policy moves.
The European Central Bank’s interest rate decision, due on Thursday, 18 July at 12.45am GMT, is expected to maintain current policy settings. However, the tone of the meeting and any forward guidance will set the foundation for market expectations.
On the same day at 1.30am GMT, Australia’s labour force report will be used to gauge the health of the labor market. In May, the economy added 39,700 jobs, and the unemployment rate eased to 4.0%. The market expects a gain of 10,000 jobs in June, with the unemployment rate holding steady at 4.0%.
Next, due on Friday, 19 July at 10.45pm GMT, New Zealand’s inflation data will be key to understanding the country’s economic trajectory and future monetary policy.
Japan’s inflation data, set for release on 11.50pm AEST the same time, will be closely watched. Recent increases in wages and prices suggest that the Bank of Japan’s efforts to spur sustainable inflation may be gaining traction.
The US Q2 2024 earnings season is gaining momentum with key reports from major companies like Bank of America, BlackRock, and Netflix. These earnings will provide vital insights into corporate performance and economic resilience.
