From Markets to Economics – and Other Things You Need to Know – Executive Summary

Wall Street rose this week, riding on a string of strong corporate earnings, and continued to forecast imminent interest rate cuts from the Federal Reserve, despite some signs. Falcons Coming from decision makers in the United States. All three major indexes reached new highs, specifically with the S&P 500 surpassing its psychological level of 5,000 points.

The new week will provide Chinese stocks a much-needed break from the Chinese New Year holiday. a Earnings season The US may also see some cooling. However, several key economic data points will continue to be watched by investors to shape interest rate cut expectations for global central banks.

Highlights from next week

Earnings season United States: Coca-Cola, Airbnb, Lyft, Robinhood, Coinbase

With the results of major US technology companies coming in, the US earnings season may slow down next week, but eyes will continue to be on several important releases, such as Airbnb, Robinhood, Dropbox and Coinbase.

So far, corporate earnings dynamics have been strong. On February 9, 2024, 66% of S&P 500 companies released their results, with 81% reporting a positive result. This outperformance rate exceeds the five-year average (77%) and the ten-year average (74%).

February 13, 2024 (Tuesday, 1:30 PM GMT): US Consumer Price Index (CPI)

The recent spike in US economic data (strong employment numbers, higher wage growth, and stronger-than-expected services activity) has required some recalibration of the Fed's interest rate expectations, with the rate likely to fall to just 16% in March. Compared to 63% recorded just one month ago.
In the face of a still-hot US economy, markets will be alert to the possibility of stronger economic conditions that are detrimental to the fight against inflation.

So far, policymakers have maintained their cautious stance, indicating that they are in no rush to cut interest rates. However, with markets still anticipating five interest rate cuts by 2024, versus the three cuts expected by the Federal Reserve, the progress of inflation will be monitored to provide justification for lower market rates. Dovish.

Overall US inflation is forecast at 2.9% year-on-year, compared to the previous 3.4%, while core inflation may fall to 3.7%, compared to the previous 3.9%. On a monthly basis, the overall CPI is expected to fall to 0.2% from the previous reading of 0.3%, while the core index is expected to remain unchanged at 0.3%.

February 14, 2024 (Wednesday 07:00 GMT): UK inflation rate

Last month (December), the annual inflation rate was surprisingly positive at 4%, up from 3.9% in November, and above consensus expectations for a decline to 3.8%.

This was the first rise in inflation in ten months, and appears to have played a major role in the Bank of England's (BoE) interest rate meeting last month, which was stronger than expected in some areas, including:

• Two political leaders voted in favor of another 25 basis point increase in interest rates.
• The Bank of England's updated inflation forecasts showed inflation above target during the second half of 2024 and 2025.
• The Bank of England reiterated that “monetary policy must remain tight for long enough for inflation to return to the 2% target,” dampening hopes for imminent interest rate cuts.

This month, preliminary consensus forecasts indicate that annual global inflation will rise in January to 4.3% on an annual basis; However, this may change as more forecasts are released next week.

February 14, 2024 (Wednesday 11:50 PM Singapore time): Japan's preliminary GDP growth rate in the fourth quarter

Previously, Japan's third-quarter GDP fell more than expected, at an annual pace of 2.9%, its first contraction in four quarters. This situation reflects the fragility of the Japanese economy, as private consumption and business investment have been weaker than expected.

However, conditions have been set for a slight rebound in the fourth quarter, with expectations that Japan's preliminary GDP in the fourth quarter will once again record a year-on-year expansion of 1.4%, versus the previous contraction of 2.9%. On a quarterly basis, Q4 GDP is expected to grow by 0.3%, an improvement from the previous reading of -0.7%.

As Japanese policymakers consider exiting negative interest rate policies this year, any weaker-than-expected GDP reading may not provide conviction that conditions are ripe for raising interest rates, and this may prevent Japanese policymakers from presenting any major policy changes at their meeting. in March. .

XTB analysis