Key events to watch in the week ahead: 17 – 23 June 2024

This week’s overview

A busy week of US consumer price index (CPI) and Federal Open Market Committee (FOMC) meeting saw the S&P 500 and Nasdaq deliver yet another record high, as promising inflation progress seems to downplay the ‘hawkish hold’ from the Federal Reserve (Fed).

Sector performance also revealed a continued lean into AI-exposed names, as traction continued to follow through from Apple’s latest artificial intelligence (AI) push. The ‘Magnificent Seven’ stocks continues to lead the pack, driving a further disparity between growth and value.

Into the new week, here are four things on the radar.

17 June 2024 (Monday, 10am SGT): China’s fixed asset investment, industrial production, retail sales

The recent run in economic data out of China has been more mixed than reassuring. While a stronger recovery is presented in external demand, the latest inflation data suggests that domestic consumption is still trying to regain its footing.

A series of economic data will be on watch ahead to provide clarity on whether China’s economic recovery can find more momentum. Expectations are for industrial production to edge lower to 6.4% year-on-year from the 6.7% prior. Having underperformed in April, retail sales are expected to improve to 3.0% from 2.3% prior, while fixed asset investment is expected to remain unchanged at 4.2%.

Market participants will be watching for any signs of stabilisation to reflect some degree of success in the series of accommodative polices thus far. A set of lower-than-expected readings may however send a warning sign for its growth and raise calls for quicker policy support to better achieve its growth target of around 5%.

18 June 2024 (Tuesday, 12.30pm SGT): Reserve Bank of Australia (RBA) interest rate decision

As widely expected, the RBA kept its official cash rate on hold at 4.35% for a fourth straight meeting at its last Board meeting in May. The decision came despite data showing that core inflation exceeded expectations in the first quarter of the year.

In the accompanying statement, the RBA sounded neutral, noting that while the Board had discussed the possibility of an interest rate hike, higher interest rates were working to establish a more sustainable balance between demand and supply.

The RBA's forward guidance was identical to that offered in the March meeting. "The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain, and the Board is not ruling anything in or out."

In the lead-up to next week's Board meeting, retail sales and gross domestic product (GDP) readings have been weaker than expected, while labour market and inflation data have been firm. All of this suggests the RBA will keep rates on hold at 4.35% for a fifth consecutive meeting as it continues to focus on bringing sticky inflation back to target. The tone of the meeting is expected to remain neutral.

Ahead of the meeting, the rates market is pricing in a ~45% chance of a 25 basis point (bp) RBA rate cut in December, with a full rate cut priced by April.

20 June 2024 (Thursday, 7pm SGT): Bank of England (BoE) interest rate decision

Last month (May), the BoE kept rates on hold with a 7-2 vote as Ramsden and Dhingra dissented in favour of a 25 bp cut. Combined with downward revisions to the CPI forecasts and some tweaks to the statement, it was considered a dovish statement that potentially opened the door for a rate cut in June, depending on upcoming “data releases and how these inform the assessment that the risks from inflation persistence are receding.”

Unfortunately, since the May meeting, a smaller drop than expected in April's inflation data saw the market reduce the chances of a BoE rate cut in June to almost zero. Unless next Wednesday's inflation report for May is significantly weaker than expected, the BoE will likely keep rates on hold next week at 5.25% to ensure that the risk if inflation becoming embedded above 2% dissipates. The rates market is currently 80% priced for a first 25 bp BoE rate cut in September.

21 June 2024 (Friday, 7.30am SGT): Japan’s inflation rate

The Bank of Japan (BoJ) guided that they will open the door for further rate increases if trend inflation heads towards 2%. The factors being evaluated for underlying inflation were guided to be services prices, alongside corporate wages and price-setting behaviour.

With a higher-than-expected 2.1% growth in Japan’s nominal wages for April, the virtuous wage-price spiral , which the central bank seeks, seems to be more apparent. Upcoming focus will be on whether higher wage growth will feed into inflation and the level at which pricing pressures may stabilise.

For now, headline and core inflation has eased to 2.5% and 2.2% respectively for April, but more clues on whether price growth will hold durably around the 2% target level still need to be sought.