Key events to watch in the week ahead: 9 – 15 December 2024

This week’s overview

Wall Street drifted higher this week, riding on positive seasonal effects, anticipation for another 25 basis point (bp) rate cut in December and resilience in economic conditions. There are some political risks coming from France and South Korea, but for now, the uncertainty seems limited within their own space with less knock-on impact on global markets.

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

9 December 2024 (Monday, 9.30am SGT): China’s consumer price index (CPI) and producer price index (PPI)

China’s inflation read for October revealed that domestic demand remains weak, with consumer prices growing at 0.3% year-over-year, a slight downtick from September's 0.4%. This marks the lowest inflation level in four months, suggesting continued deflationary pressures despite recent government efforts to stimulate the economy.

China’s producer prices also contracted more than expected, registering a 2.9% year-on-year decline versus the -2.5% consensus. This is its deepest contraction since December 2023. With recent Purchasing Managers' Index (PMI) data pointing to an uneven economic recovery, the effectiveness of authorities’ policy measures remains a question.

Ahead, expectations are for China’s November CPI to tread in its subdued state but still slightly positive. With potential distortions from the Golden Week holiday in October, the upcoming read may offer a clearer picture of China’s economic momentum.

10 December 2024 (Tuesday, 11.30am SGT): Reserve Bank of Australia’s (RBA) interest rate decision

As widely expected, the RBA kept its official cash rate on hold in November at 4.35% for an eighth straight meeting.

In the November Statement of Monetary Policy, the RBA lowered its forecasts for end-2024 gross domestic product (GDP) growth to 1.5% from 1.7%. It also lowered its forecast for headline and trimmed-mean inflation for the same period to 2.6% YoY (from 3%) and 3.4% YoY (from 3.5%), respectively.

In light of this week's weak Q3 GDP report, the RBA is anticipated to keep its official cash rate on hold at 4.35%. However, we emphasise the strong likelihood of a dovish shift from the RBA at next week's Board meeting following the underwhelming Australian Q3 GDP results and to keep the Australian economy on its “narrow path”.

This shift would set the stage for a potential rate cut in February.

11 December 2024 (Wednesday, 9.30pm SGT): US November core inflation

The US October CPI came in line with market expectations, with headline inflation rising 2.6% from the 2.4% prior, while the core aspect remained unchanged at 3.3% year-on-year. The lack of an upside inflation surprise kept market expectations rooting for a 25 bp rate cut from the US Federal Reserve (Fed) this month.

Market participants will hope to see more signs of inflation being under control, particularly in the core aspect, in order to pave the way for the Fed’s easing process to continue into next year. Ahead, expectations are for headline CPI to increase 0.2% month-on-month (MoM), while the core inflation may increase 0.3% MoM, both unchanged from October.

12 December 2024 (Thursday, 8.30am SGT): Australia’s employment change

Last month (October), the Australian economy added 15.9k jobs in October, marginally weaker than the 25k gain the market had expected. The unemployment rate remained at 4.1% for the third month as the participation rate eased to 67.1% from a record high of 67.2%.

This month, the preliminary expectation is that the Australian economy will create 20,000 jobs and that the unemployment rate will remain at 4.1%. The Australian interest rate market is pricing in a 40% chance of an RBA rate cut in February, with the first 25bp RBA rate fully priced for April.

12 December 2024 (Thursday, 9.30pm SGT): European Central Bank (ECB) interest rate decision

At its last meeting in October, the ECB continued to ease rates with a 25bp cut to its key deposit rate facility to 3.25%, following up its 25bp rate cut in September. The move was widely expected following downside surprises in the September PMIs and inflation prints, and its delivery was viewed as modestly dovish relative to market expectations.

Given the ongoing weakness in surveys since October and the continued decline in core inflation, another 25bp rate cut is expected on December 12, bringing the key deposit rate down to 3.00%. The accompanying statement is expected to sound dovish. The current aim of “keeping policy rates sufficiently restrictive for as long as necessary” could be replaced with an intention to “gradually remove restrictions”. This would pave the way for more cuts next year.

The ECB will release a new set of forecasts extending to 2027. Q3 2024 GDP growth was stronger than expected, but revisions to past data and disappointing investment suggest minor downward adjustments for this year and next. Inflation also surprised to the downside in Q3 and early Q4, especially in core measures. Consequently, downward revisions to inflation forecasts are likely, with the 2% target expected to be reached sooner than anticipated.

The Euro Area rates market is already fully priced for a 25bp rate cut at next week's ECB meeting. A cumulative 157 bp of ECB rate cuts are priced between now and December 2025.