Key events to watch in the week ahead: 3 – 9 June 2024

This week’s overview

Wall Street took a beating this week, with higher Treasury yields and hawkish Fedspeak leading to some unwinding of the recent earnings-induced rally. Higher-than-expected inflation read out of Germany and Australia offered little comfort on the global inflation fight, which kept market sentiments in a cautious tone ahead of the key US personal consumption expenditures (PCE) inflation data.

With expectations still very much split on whether we will get the first rate cut in September this year, the Federal Reserve (Fed)’s preferred gauge of inflation will be on watch to offer any assurances that US inflation remains under control.

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

3 June 2024 (Monday, 9.45am SGT): China’s Caixin manufacturing purchasing managers' index (PMI) / 5 June 2024 (Wednesday, 9.45am SGT): China’s Caixin services PMI

The series of economic data out of China lately has been rather mixed. While there are some green shoots seen from higher-than-expected 1Q gross domestic product (GDP) and improved April trade activities, market participants also have to digest weak domestic demand from underperforming retail sales and inflation data, overall pointing to an uneven recovery.

The latest official PMI numbers for May have also surprised on the downside, with manufacturing PMI dipping back into contraction (49.5 versus 50.5 consensus) and service activities coming in weaker-than-expected (51.5 versus 51.5 consensus). Further signs of economic weakness may call for a step-up in supportive measures from authorities into the second half of the year.

Current expectations are for China’s Caixin manufacturing PMI to tick slightly higher to 51.5 from the 51.4 prior.

5 June 2024 (Wednesday, 9.30am SGT): Australia’s Q1 GDP growth rate

Australian GDP rose by 0.2% in the December quarter of 2023 for an annual rate of 1.5% YoY. While it was the ninth straight rise in quarterly GDP, it was viewed as a soft number as more normal levels of GDP in Australia are closer to 3%.

This quarter, the preliminary expectation is for GDP to increase by 0.3% and for the annual growth rate to rise by 1.2%. This aligns with the Reserve Bank of Australia (RBA)’s revised forecasts from the May Statement of Monetary Policy.

The RBA’s revisions lower mainly reflect a weaker outlook for consumer spending, which is expected to help return demand and supply into balance in the coming quarters. GDP growth is expected to increase gradually from late 2024, driven by a pick-up in household consumption growth.

6 June 2024 (Thursday, 8.15pm SGT): European Central Bank (ECB) interest rate decision

At the April policy meeting, the ECB revealed greater confidence that inflation is on track towards target and opened the door for a rate cut in the upcoming June meeting. Follow-up comments from policymakers since then also highlighted their intention for imminent rate easing, with ECB President Christine Lagarde recently saying “strong likelihood” of a June move.

With that, a 25 basis point (bp) rate cut next week looks to be a done deal, with the rate markets pricing a 97% probability for a cut. But beyond that, opinions remain split on the rate trajectory into the second half of the year, which will leave focus on any upcoming guidance from the statement and press conference to offer clues on the timing of future rate cuts.

Fresh economic projections on growth and inflation will also be provided at the upcoming meeting. At least for now, policymakers may still likely lean on their data-dependent stance, potentially awaiting more clues from incoming economic data and for when the Fed may make its first rate move.

7 June 2024 (Friday, 8.30pm SGT): US non-farm payrolls

In the April reading, the US economy added 175,000 jobs, a sharp fall from an upwardly revised 315,000 jobs in March, and below consensus expectations, looking for a 243,000 increase. The unemployment rate edged up to 3.9% from 3.8% on an unchanged participation rate of 62.7%. Rounding out the softer set of numbers, average hourly earnings rose by 0.2% MoM, allowing the annual rate to fall to 3.9% YoY in April from 4.1% prior.

Fed speakers have emphasised they are in no rush to cut rates, and this week, Federal Bank of Minneapolis Neel Kashkari even floated the idea that another rate hike might still be needed to bring inflation back to target. However, Fed speakers have also signalled that an unexpected deterioration in the labour market would provide a faster path to rate cuts.

This month, the market is looking for the US economy to add 180k jobs and for the unemployment rate to remain stable at 3.9%. The participation rate is expected to remain at 62.7%, and average hourly earnings are expected to remain stable at 3.9% YoY.