The Week Ahead: US retail sales, UK inflation, Netflix results

Welcome to Michael Kramer’s pick of the top market events to look out for in the week ahead.

On Monday US Federal Reserve chair Jay Powell will be interviewed at the Economic Club of Washington DC by David Rubenstein, the billionaire co-founder of private equity firm Carlyle Group, which has almost $400bn in assets under management. Following Thursday’s announcement that US inflation fell faster than expected to 3% in June, Powell’s Q&A on Monday (from 4pm, UK time) could provide traders with an opportunity to gauge whether the Fed still plans to cut interest rates just once this year. Some investors are already betting on two rate cuts this year, which helped lift the S&P 500 to a record high of 5,642.45 points on Thursday. 

The coming week also sees the release of some key macroeconomic data points, including updates on US retail sales and UK inflation. Meanwhile, US earnings season will gather pace as a rush of companies – including Netflix – report their latest quarterly results.

US June retail sales

Tuesday 16 July
US retail sales are expected to have declined 0.2% month-on-month in June, down from an increase of 0.1% month-on-month in May, indicating cooling consumer sentiment. That said, retail sales excluding autos are forecast to have risen 0.1% month-on-month in June, up from a fall of 0.1% in the month to May. The retail sales data will come hot on the heels of Thursday’s inflation report, which showed a bigger-than-expected fall in consumer prices in June. 

The fall in US CPI to 3% in June certainly raised eyebrows. It also contributed to an uptick in EUR/USD. The euro made a significant move higher against the dollar on Thursday 11 July, reaching $1.0896 before falling back to the upper bound of a symmetrical triangle at around $1.0887, as shown on the chart below. The market may need more data indicating a cooling US economy to be convinced that it is time for the euro to rise further. Weaker US retail sales could enable the euro to clear that hurdle, potentially sending it to around $1.10, while the downside seems limited to around $1.07.

EUR/USD, August 2023-present

^{Sources: TradingView, Michael Kramer}

UK June CPI 

Wednesday 17 July
Economists estimate that the UK’s consumer price index increased 0.1% month-on-month in June, easing from 0.3% in both May and April, and down significantly from 0.6% in both March and February. On an annual basis, CPI is forecast to have slowed to 1.9% in June, down from 2% in May. 

The pound has already made gains against the dollar, rising to $1.295 following Thursday’s announcement that US CPI fell to 3% in June. GBP/USD could rise further regardless of whether the UK CPI print for June is in line with expectations or not, as the pound appears to have already broken out. For the first time in almost a year, the pound has exceeded resistance at $1.285, breaking out above the symmetrical triangle on the chart below. Unless the CPI reading misses forecasts by a wide margin, the pound's path of least resistance appears to be higher, with the potential to climb back to $1.31 in the near term.

GBP/USD, May 2023-present

^{Sources: TradingView, Michael Kramer}

Netflix Q2 results

Thursday 18 July
Analysts expect Netflix to report that second-quarter earnings grew 43.9% year-on-year to $4.74 a share. Revenue is projected to have grown 16.3% from the year-ago period to $9.5bn. Analysts also forecast that net subscriber growth fell 19.8% on an annual basis to 4.724 million. In terms of the outlook, analysts are looking for third-quarter revenue to grow 15.1% to $9.8bn. That could push earnings up 26.7% to $4.73 a share. The market has priced in a post-earnings move of about 8.1%, putting Netflix shares – which were trading at about $653 at the close on Thursday – in a range from $600 to $700.

The stock fell sharply after the company reported its Q1 results in April. This time round, the shares  down roughly 3% this month – appear to be breaking lower ahead of the results. The stock broke the lower bound of an uptrend on 11 July, setting up a potential retest of support at $619, while poor results could see the shares plunge to $552.

To the upside, the $680 to $700 region is a resistance zone that dates back to highs last seen in 2021. However, momentum in the shares has turned lower, based on the relative strength index, creating a bearish divergence. This suggests that upward momentum, which has seen the shares climb roughly 250% over the past two years, may be fading. Unless the Q2 results are stellar, the shares could be on the verge of a steep drop.

Netflix share price, December 2023-present

^{Sources: TradingView, Michael Kramer}

Key economic and company events

Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:

Monday 15 July

• China: Q2 gross domestic product (GDP); June industrial production; June retail sales
• Eurozone: May industrial production
• Germany: May retail sales
• Results: BlackRock (Q2), Goldman Sachs (Q2)

Tuesday 16 July

• Canada: June consumer price index (CPI)
• Eurozone: European Central Bank (ECB) lending survey
• Italy: June CPI
• New Zealand: Q2 CPI
• US: June retail sales
• Results: B&M European Value Retail (Q1), Bank of America (Q2), Charles Schwab (Q2), Morgan Stanley (Q2), Ocado (HY), UnitedHealth (Q2)

Wednesday 17 July

• Eurozone: June CPI
• Japan: June imports and exports
• UK: June CPI, June producer price index (PPI), June retail price index (RPI)
• US: June housing starts; June industrial production
• Results: Elevance Health (Q2), Johnson & Johnson (Q2), Prologis (Q2) 

Thursday 18 July

• Australia: June unemployment rate
• Eurozone: ECB interest rate meeting 
• Japan: June CPI
• UK: June unemployment rate
• Results: Abbott Laboratories (Q2), AJ Bell (Q3), Blackstone (Q2), Dunelm (Q4), Intuitive Surgical (Q2), Marsh McLennan (Q2), Netflix (Q2), SSE (Q1)

Friday 19 July

• Canada: May retail sales
• UK: July consumer confidence, June public sector net borrowing, June retail sales
• Results: American Express (Q2), Hargreaves Lansdown (Q4)

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.