Key events to watch in the week ahead: 26 February - 3 March 2024

Initial jitters over higher-than-expected US inflation were quickly overridden by Nvidia’s stellar earnings this week, with the artificial intelligence (AI) darling crushing both top and bottom-line expectations in its 4Q results. Market participants were also comforted by its growth outlook, with the higher-than-expected revenue forecast for the current quarter ($24 billion versus $22.17 billion consensus) suggesting that demand for its AI chips will continue for much longer.

That helped to put Wall Street almost back to where it started last week. The US dollar retreated for the fourth straight session as US Treasury yields consolidate near-term. Brent crude prices continue to hang near its six-week high, seemingly awaiting for the next catalyst to reclaim its year-to-date high.

Heading into the new week, here are five events on our radar.

US earnings season: Zoom Video, eBay, Salesforce, Baidu, NetEase

The US 4Q earnings season is heading to its final phase, with 82% of S&P 500 companies having released their results as of 21 February 2024. Thus far, corporate earnings momentum has been robust with 79% of S&P 500 companies beating earnings expectations, overall marking the second straight quarter that the index has reported positive earnings growth.

The highly-watched “Magnificent Seven” results have also concluded with Nvidia’s stellar earnings this week. Nevertheless, focus will remain on several notable earnings next week, namely from Zoom Video, eBay, Salesforce, Baidu and NetEase.

27 February 2024 (Tuesday, 7.30am SGT): Japan’s inflation rate

Japan’s inflation has been slowing since its peak in January 2023, with both the headline and core pricing pressures touching their respective 16-month low in December last year. Further easing in inflation may offer room for the Bank of Japan (BoJ) to take on further wait-and-see, by validating their views that inflation is still very much cost-push rather than the demand-driven factors they sought.

Expectations are for January headline inflation to ease to 1.9% from previous 2.6%, while the core aspect (which excludes food prices) may ease to 1.9% from previous 2.3%. The core-core component (which excludes volatile food and energy prices) is also expected to ease to 3.3% from previous 3.7%.

Thus far, Japanese policymakers remain on the lookout for a positive wage-inflation cycle and a sustained achievement of its 2% inflation as key conditions for an exit from its ultra-accommodative policies. Despite the Japanese economy unexpectedly slipping into recession at the end of last year, markets are currently pricing a 60% chance for a rate hike in the April meeting, which will come after the shunto wage negotiations season.

28 February 2024 (Wednesday, 8.30am SGT): Australia’s monthly consumer price index (CPI) indicator

Data released late last month showed inflation in Australia moderated across the key quarterly and monthly measures of inflation. To recap,

• Headline inflation rose by 0.6% in the December Quarter (Q4) for an annual rate of 4.1% YoY, below the 4.3% expected and well below the 5.4% print in Q3.

• The Reserve Bank of Australia’s (RBA) preferred measure of inflation, the trimmed mean, rose by 0.8% QoQ, which saw the trimmed mean fall to 4.2% YoY, a significant drop down from 5.2% in Q3.

• The monthly CPI indicator for December increased by 3.4% YoY, easing from 4.3% in November and less than the 3.7% expected.

• The monthly CPI indicator for December, excluding volatile items, rose by 4.2% in December, easing from 4.8% in November.

This month (January), the monthly CPI indicator is expected to increase to 3.2%, extending its fall from the 8.4% high of December 2022. This will provide further comfort to the RBA that higher interest rates continue to work to reduce inflation and to achieve a better balance between supply and demand.

We expect that lower inflation and a cooling labour market will see the RBA remove its tightening bias in the coming months before cutting rates by 25 rate cuts in August and delivering a second 25 basis point (bp) cut in November.

29 February 2024 (Thursday, 9.30pm SGT): US core personal consumption expenditures (PCE) price index

Last month (December), the Federal Reserve (Fed) preferred measure of inflation, core PCE prices, which exclude volatile food and energy, rose by 0.2%. The annual rate fell to 2.9%, the lowest since 2021.

Following the release of a hotter Producer Price Index (PPI) print for January, which has a strong feed through into the core PCE, the expectation is for core PCE to rise by 0.3% MoM, which would be the highest in four months.

A hotter number in January would be consistent with the view for a bumpy path lower in inflation from here and a reminder of why the Fed has gone to great lengths in recent weeks to push back against expectations that Fed rate cuts are imminent.

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

1 March 2024 (Friday, 9.30am SGT): China’s National Bureau of Statistics (NBS) manufacturing and non-manufacturing purchasing managers index (PMI)

China’s PMI figures have revealed slight improvement in business conditions in January this year, with the manufacturing sector registering a smaller contraction (49.2 versus 49.0 in Dec) while the services side improved to 50.7 from previous 50.4.

China authorities have been keeping its policies supportive, recently even cutting its five-year loan prime rate (LPR) by 25 bp to 3.95% - its largest cut on record. But given the limited success of previous cuts, markets reservations remain. Market participants will continue to be on the lookout for a sustained turnaround in economic conditions, which may not be presented in the upcoming PMI figures just yet.

Expectations are for its official February manufacturing PMI to remain in contractionary territory at 49.5, albeit a slight improvement from previous 49.2. The Caixin manufacturing PMI read, which has a greater focus on smaller private enterprises, will also be released on the same day. Expectations are for it to edge lower to 50.7 from 50.8, overall reflecting still-subdued growth conditions and calling for more to be done from authorities.