The Week Ahead: US inflation, ECB rate decision, Broadcom results

The release of US inflation data in the coming week will shape the Federal Reserve’s interest rate decision on 18 December. The markets are currently factoring in a 67% probability that the Fed will lower the target range for its key interest rate by a quarter of a percentage point to 4.25-4.5% from the current 4.5-4.75%, according to the CME FedWatch tool. However, any unexpected inflation readings – whether from the consumer price index (CPI) on Wednesday, the producer price index (PPI) on Thursday, or import and export price indices on Friday – could change those odds. 

US November CPI

Wednesday 11 December
Analysts expect that US CPI increased 2.7% in the year to November, up from 2.6% in October. On a monthly basis, CPI is thought to have risen 0.2% in November, the same rate as in each of the previous four months. Core CPI, which excludes volatile food and energy prices, is projected to have risen 3.3% year-on-year and 0.3% month-on-month, with both figures unchanged from October.

Compared to analyst estimates, the inflation swaps market is pricing in slightly hotter headline CPI readings of 2.72% year-on-year and 0.27% month-on-month. If the swaps market is correct and the CPI figures come in higher than analysts expect, the data could undermine the market’s projected path for rate cuts in 2025 and perceptions of the ‘neutral’ US interest rate. This would likely be most damaging to equity markets, which have risen sharply in 2024 as financial conditions have eased.

The S&P 500’s trading range has been narrowing since a dip in August, and its relative strength index shows a similar pattern as it climbs towards 70, a reading which typically indicates overbought conditions. The key near-term risk for the S&P 500 would be a break below 6,000, a significant area of support. A breach below this level could lead to a decline to around 5,850.

S&P 500, July 2024 - present

Sources: TradingView, Michael Kramer

ECB interest rate decision

Thursday 12 December
The European Central Bank is expected to cut its overnight interest rate by a quarter of a percentage point on Thursday. Rate cuts in the eurozone have contributed to a weaker euro, particularly against the US dollar and the Japanese yen.

The EUR/JPY pair has retreated to its August and September lows, with €1 currently worth approximately ¥159.30. The pair has failed to break above its 10-day exponential moving average, which is now providing resistance. 

With the ECB likely to cut rates – and the Bank of Japan possibly set to raise rates at its meeting on 19 December – the yen could be about to strengthen further against the euro. If EUR/JPY breaks below ¥155.25 – an area of support dating back to June 2023 – the pair could move towards ¥150. 

EUR/JPY, March 2023 - present

Sources: Bloomberg, Michael Kramer

Broadcom Q4 results

Thursday 12 December
Analysts expect Broadcom to report that fiscal fourth-quarter 2024 earnings grew 26% year-on-year to $1.39 a share on revenue of $14.1bn, up 51.7% versus the year-ago period. The California-based semiconductor company’s adjusted gross margin is expected to have risen to 76.6%, up from 74.0% a year earlier. Investors and traders are likely to pay particular attention to Broadcom’s semiconductor revenue growth, which is anticipated to have increased 9.9% to $8.1bn, driven by AI revenue of $3.5bn.

If the Nasdaq-listed company provides guidance, that will be another area of focus for traders. Looking ahead, analysts expect revenue in fiscal Q1 to grow 22.3% to $14.6bn, with adjusted gross margin remaining stable at 76.6%. For the full fiscal year 2025, revenue growth is projected to slow to 17.6%, down from 44% in fiscal 2024, as revenue reaches $60.1bn. 

The Broadcom share price, up 57% this year at $170.47 as of Thursday’s close, has been unable to surpass resistance at around $185, having tested this area three times since June. With the options market anticipating a 6% move in the stock price after the Q4 results, the shares are likely to continue to meet resistance near $185 unless the company delivers a significant upside surprise The key downside risk is an in-line quarter that fails to impress, potentially causing the shares to fall below the uptrend and support at $160. This could lead to a retest of the September lows at $134, which were reached following the last earnings report.

Broadcom share price, November 2023 - present

Sources: Bloomberg, Michael Kramer

Key economic and company events

The coming week’s major economic announcements and scheduled US and UK company reports include:

Monday 9 December

• China: November consumer price index (CPI)
• Results: Casey’s General Stores (Q2), HealthEquity (Q3), MongoDB (Q3), Oracle (Q2)

Tuesday 10 December

• Australia: Reserve Bank of Australia interest rate decision
• China: November exports, imports and trade balance
• Germany: November CPI
• Results: Ashtead (Q2), AutoZone (Q1), Ferguson (Q1), GameStop (Q3), Moonpig (HY), Toll Brothers (Q4)

Wednesday 11 December

• Canada: Bank of Canada interest rate decision
• US: November CPI
• Results: Adobe (Q4)

Thursday 12 December

• Australia: November unemployment rate
• Eurozone: European Central Bank interest rate decision 
• Japan: Q4 Tankan large manufacturing index
• Switzerland: Swiss National Bank interest rate decision
• US: November producer price index (PPI), initial jobless claims to 6 December
• Results: Broadcom (Q4), Ciena (Q4), Costco Wholesale (Q1), Currys (HY), Lennar (Q4), Nordson (Q4)

Friday 13 December

• France: November CPI
• Germany: October exports, imports and trade balance
• UK: October gross domestic product (GDP), December GfK consumer confidence index 
• US: November export price index, November import price index
• Results: No major scheduled announcements

Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.

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