Key events to watch in the week ahead: 8 – 14 July 2024

This week’s overview

Wall Street headed higher this week to new record highs, as a series of weaker US economic data pointed towards slowing US growth prospects, which leaves a September rate cut more likely than not. The odds for a Federal Reserve (Fed) September cut are now priced at 68% versus the 63% prior.

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

US 2Q earnings season

The US 2Q earnings season will kick off with the major banks results as per usual, with JPMorgan, Wells Fargo and Citigroup in focus. Fresh updates will be sought on how the US largest lenders are faring to reflect the strength of the US economy, alongside their economic outlook and guidance around key profit drivers such as net interest income and investment banking activities.

9 July 2024 (Tuesday, 8.30am SGT): Australia’s consumer confidence

Last month (June), the Westpac Consumer Sentiment index increased by 1.7% to 83.6 points, marking the first rise in four months and the highest reading since February. Nonetheless, the index remains in deeply pessimistic territory as persistent inflation and high interest rates continue to weigh on Australian households.

In response to higher-than-expected inflation, the Reserve Bank of Australia (RBA) has sounded more hawkish. At the last board meeting, it confirmed that it discussed the option to hike rates but not the option to cut rates. The threat of an additional RBA rate hike before year-end is expected to weigh on consumer sentiment this month and offset the positive impact of the stage 3 tax cuts. Preliminary expectations are for a -0.3% fall in July, taking the index back to 83.4.

10 July 2024 (Wednesday, 9.30am SGT): China’s inflation rate

China’s May consumer prices registered a 0.3% increase from a year ago, unchanged from April and escaping deflationary territory for the fourth straight month. On the other hand, producer prices improved to -1.4% year-on-year from the -2.5% prior, which marked its smallest decline since February 2023.

While China’s inflation has somewhat stabilised, prices’ growth remains at subdued levels as a reflection of still-weak consumer demand. Any weaker read may raise calls for more support measures into the second half of this year, to keep the economy on track towards its 5% growth target for 2024 and to drive a more sustainable recovery in economic conditions.

11 July 2024 (Thursday, 8.30pm SGT): US consumer price index (CPI)

Last month (May), the annual rate of inflation in the US unexpectedly slowed to 3.3% YoY from 3.4% in April, below forecasts of 3.4%. The annual core inflation rate eased to 3.4% YoY in May from 3.6% in April, for its lowest reading in three years.

The cooler CPI readings were followed in the same session by a more hawkish than expected Federal Open Market Committee (FOMC) meeting as the Fed’s Summary of Economic Projections (SEP) dots showed just one 25 basis point (bp) cut in 2024 vs. the three rate cuts forecast in March.

Fed Chair Powell, speaking at the Sintra Forum in Portugal this week, sounded dovish compared to his tone at the meeting and described "real progress on inflation." This and softer economic data this week have increased confidence that the Fed will start cutting rates in September.

Further confidence will be gained if next week's CPI data is in line with or below market expectations. The preliminary expectation is for headline inflation to fall to 3.1% YoY from 3.3% prior. Core inflation is also expected to remain stable at 3.4% YoY. The rates market is currently pricing in 19 bp of rate cuts for September and 48 bp of Fed rate cuts before year-end.