This week presents a heady mix of developments, including interest rates in Europe, inflation in China and the US, and share markets shifting focus from economic factors to market momentum issues.
Normally, Wall Street and its long line of ‘instant analysts’ would be eager for another US Consumer Price Index reading. However, after the somewhat weak jobs report and confirmation from a senior Federal Reserve member that a rate cut is imminent, economic data points have lost their immediate appeal.
Now, investors are excited about the value of AI, computer chips, and chip stocks in general. This is despite Apple’s major refresh launch of its iPhone and several other products early Tuesday morning, Sydney time, which would typically dominate market sentiment and direction.
However, AI, computer chips, and tech stocks, in general, are currently out of favour. This led to the Nasdaq and the S&P 500 experiencing notable losses over the past week, with prices of all megacap stocks tumbling, led by Nvidia.
The CPI is forecast to ease to below 3% on a headline basis, around 2.6%, and slightly above that on a core basis, at approximately 3.2%.
The first rate cut since the pandemic in 2020 is now locked in for the Federal Reserve’s meeting next week. This is when the so-called dot plot and new economic forecasts will be released.
The dot plot is a representation of where members of the Federal Open Market Committee see interest rates heading. The plot for 2025 will be closely watched.
The Producer Price Index for August will also be released later this week, with forecasts suggesting it will dip to an annual 2%, following what could be a small contraction due to weak energy prices.
Earnings results from two major tech companies, Adobe and Oracle, will test investor sentiment towards the tech sector. The results will need to impress; otherwise, a sell-off could be messy. US supermarket chain Kroger is also due to report, as it continues to pursue its merger with rival Albertsons.
In Europe, the European Central Bank is expected to deliver a second rate cut at its meeting on Thursday.
China’s inflation figures for August will be released later today, showing a small rise in the consumer price index and another decline in producer prices. Chinese trade data for August, initially scheduled for Saturday, is now due out tomorrow.
Additionally, there will be data on loans, car sales on Wednesday, and, tentatively on Saturday, figures on house prices, retail sales, production, investment, and urban employment.
In Australia, it’s a relatively quiet week, with the NAB’s monthly business survey and the Westpac consumer confidence survey both due. The Reserve Bank’s Assistant Governor for Economics, Sarah Hunter, is set to deliver a speech on Wednesday, likely discussing how inflation is detrimental to the economy—though not for shareholders of major banks, judging by Friday’s gains.