Key events to watch in the week ahead: 12 - 18 February 2024

This week’s overview

Wall Street followed through with its risk rally this week, tapping on a series of robust corporate earnings while continuing to price for impending Federal Reserve (Fed) rate cuts despite some tints of hawkishness coming from US policymakers. All three major indices have touched their respective new highs, notably with the S&P 500 flirting with its key psychological 5,000 level.

The new week will offer China equities some much-needed break from its current gloom, in light of the upcoming Chinese New Year holidays. The US earnings season may also see some cooling, but nevertheless, several key economic data will remain on watch to move the dial around rate-cut expectations for global central banks.

As we head into the new week, here are five things on our radar.

US earnings season: Coca-Cola, Airbnb, Lyft, Robinhood, Coinbase

With the US big tech earnings behind us, the US earnings season may tone down next week but eyes will remain on several notable releases, such as Airbnb, Robinhood, Dropbox and Coinbase.

Thus far, corporate earnings momentum has been robust. As of 9 February 2024, 66% of S&P 500 companies have released their results, with 81% delivering an earnings beat. This rate of outperformance towers above both the 5-year average (77%) and 10-year average (74%).

13 February 2024 (Tuesday, 9.30pm SGT): US consumer price index (CPI)

A strong run-up in US economic data (robust job numbers, higher wage growth and stronger-than-expected services activities) has called for some recalibration in Fed rate expectations lately, with the odds of a March rate shrinking to a mere 16% compared to the 63% priced just a month ago.

Faced with a still-hot US economy, markets will be keeping a close eye on whether stronger economic conditions will hinder the inflation fight. Thus far, policymakers have stuck to their cautious stance, indicating that they are in no rush to cut rates. But with markets still looking for five rate cuts through 2024 versus the three cuts guided by the Fed, further inflation progress will be on watch to provide the justification for the more dovish market pricing.

Ahead, expectations are for US headline inflation to come in at 2.9% year-on-year versus the previous 3.4%, while the core aspect may ease to 3.7% from previous 3.9%. Month-on-month, the headline CPI is expected to soften to 0.2% from previous 0.3%, while the core reading is expected to stay unchanged at 0.3%.

14 February 2024 (Wednesday, 3pm SGT): UK inflation rate

Last month (December), the annual headline inflation rate surprised to the upside at 4%, from 3.9% in November, above consensus expectations looking for a fall to 3.8%.

It was the first rise in inflation in ten months and appears to have played a central role in last month's Bank of England (BoE) interest rate meeting, which was more hawkish than expected in some areas, including -

• Two policymakers voted for another 25 basis point (bp) rate hike.
• The BoE's updated inflation forecasts showed inflation above target during H2 2024 and 2025.
• The BoE reiterated that "monetary policy will need to remain restrictive for sufficiently long to return inflation to the 2% target", dampening hopes of imminent rate cuts.

This month, the preliminary consensus expectation is for annual headline inflation to rise in January to 4.3% YoY; however, that may change as more bank forecasts are recorded next week.

15 February 2024 (Thursday, 7.50am SGT): Japan’s preliminary Q4 gross domestic product (GDP) growth rate

Previously, Japan’s 3Q GDP has shrank more than expected at an annualised pace of 2.9%, which is its first contraction in four quarters. This reflects the fragility in Japanese economy, as weaker-than-expected private consumption and corporate investment proved to be a drag.

That said, conditions are set for a modest bounce in 4Q, with expectations in place for Japan’s preliminary Q4 GDP to revert to year-on-year expansion at 1.4% versus the previous 2.9% contraction. Quarter-on-quarter, Q4 GDP is expected to grow 0.3%, improving from the previous -0.7%.

With Japanese policymakers mulling the possibility of exiting its negative interest rate policies this year, any weaker-than-expected GDP print may not provide the conviction that conditions are ready for a raise in policy rate just yet, and that may preclude Japanese policymakers from delivering any major policy changes in its March meeting.

15 February 2024 (Thursday, 8.30am SGT): Australia’s employment change

Last month, the Australian economy lost a sizeable 65.1k jobs in December versus the 15k gain expected. The unemployment rate remained unchanged at 3.9% due to a significant drop in the participation rate from 67.1% to 66.8%.

David Taylor, ABS (Australian Bureau of Statistics) head of labour statistics, said: "The fall in employment in December followed larger than usual employment growth in October and November, a combined increase of 117,000 people, with the employment-to-population ratio and participation rate both at record highs in November."

This month, the market is looking for the economy to add 37.5k jobs and for the participation rate to increase to 66.9%. This would see the unemployment rate rise to 4.0%, the highest since February 2022 and keep our view intact for two 25 bp rate cuts in 2024, with the first in August.