Key events to watch in the week ahead: 26 August – 1 September 2024

This week’s overview

The risk rally came to a stall this week, following a V-shaped bounce in global markets which called for some near-term cooling, while sentiments await more cues on US rate outlook from Federal Reserve (Fed) Chair Jerome Powell’s speech at Jackson Hole. Reinforcing the path towards a September rate cut is the bare minimum expected of him and markets will be on the lookout for more in terms of the scale and timeline of subsequent cuts.

We may expect some lightening up in positioning into Jackson Hole, and potentially into mid next week as NVIDIA’s results will be put to the test to justify its current elevated valuation.

Looking into the new week, here are five key events to watch.

US earnings season: Salesforce, NVIDIA, CrowdStrike

The US earnings season is in its last leg, with key focus on earnings from Salesforce, NVIDIA and CrowdStrike in the upcoming week. NVIDIA will undoubtedly be the central focus, with the company accounting for 6.7% of the S&P 500, which may determine the direction for Wall Street ahead.

28 August 2024 (Thursday, 9.30am SGT): Australia’s monthly consumer price index (CPI) indicator

Key Australian inflation measures released in late July were at the margin softer than expected. The monthly CPI Indicator for June rose by 3.8% in the 12 months to June down from a 4.0% rise to May, while the core reading eased to 4.1% from 4.4% in May.

The trimmed mean rose by 0.8% in the June quarter (consensus was +1.0%), allowing the annual rate to fall to 3.9% from 4.0% prior – locking in a sixth quarter of lower annual trimmed mean inflation.

The Reserve Bank of Australia (RBA)'s board meeting minutes from August highlighted the slow pace of inflation's decline towards its 2-3% target. It also noted that during the August Board meeting, the board discussed raising rates but decided that the case for leaving rates unchanged was stronger.

The preliminary expectation is for the monthly Indicator in July to ease to 3.7% YoY from 3.8%. However, expect this to change as analysts fine-tune expectations in the coming days. The Australian interest rate market is pricing in a full 25 basis point (bp) RBA rate cut by December and a cumulative 70 bp of RBA rate cuts by May 2025.

30 August 2024 (Thursday, 5pm SGT): Eurozone’s inflation rate flash

Last month (July), the annual inflation rate in the Euro Area ticked up to 2.6% YoY from 2.5% the previous month, matching the preliminary estimate and surpassing market expectations that it would ease to 2.4%. Meanwhile, the annual core inflation rate, which strips out the more volatile categories of energy, food, alcohol, and tobacco, held steady at 2.9% for the third consecutive month.

This month, the market will look for signs that inflation is extending its decline towards the European Central Bank (ECB)’s 2% inflation target. The rates market is fully priced for a 25bp rate cut at the ECB’s 12th September meeting, with 63 bp of cumulative ECB rate cuts priced before year-end.

30 August 2024 (Thursday, 8.30pm SGT): US Personal Consumption Expenditures (PCE) price index

The July Fed minutes revealed that US policymakers viewed recent economic data with greater confidence that US inflation is headed towards their 2% target, quoting further disinflation and increases in the unemployment rate. The Fed acknowledged that disinflation has been broad based across the major subcomponents of core inflation and a vast majority of policymakers said that it would likely be appropriate to cut rate at the next meeting.

Markets have perceived a September Fed rate cut as a done deal, with the debate now revolving around how much the Fed will ease and what happen beyond September. The rates market is pricing a 74% probability for a 25 bp cut and 26% odds of a larger 50 bp move.

Barring any significant upside surprise in the PCE read, a lean towards a 25 bp cut should remain the consensus. Ahead, Refinitiv estimates are for July headline PCE price index to rise 0.2% month-on-month, an uptick from the 0.1% prior.

31 August 2024 (Saturday, 9.30am SGT): China’s National Bureau of Statistics (NBS) Purchasing Managers' Index (PMI)

China’s official PMI figures have been struggling to see any significant pick-up, which paint a still-subdued growth outlook for the world’s second-largest economy. For July, manufacturing activities remain in contraction for the third straight month at 49.4, while non-manufacturing PMI edged lower to 50.2, which marked its lowest level since November 2023.

The Caixin PMI, which has a greater focus on small and midsize enterprises (SMEs), has disappointed with an unexpected contraction in the manufacturing sector as well, although services did hold up a little better.

Back in July, China has surprised markets by cutting major short and long-term interest rates, as weaker-than-expected economic data seems to cast further doubts on their 5% growth target for this year. Ahead, little fireworks are expected for the PMI data, but with the services PMI hanging precariously near to contractionary levels, a broad-based contraction in economic activities may raise call for more to be done by authorities to stabilise growth.