Read on for Michael Kramer's weekly market preview, or watch the video above for RRG Research’s analysis of major indices and tech stocks.
Welcome to Michael Kramer’s pick of the top three market events to look out for in the week beginning Monday 13 May.
A fresh influx of US inflation data starting from Tuesday will give markets much to ponder in the week ahead. The health of the US consumer will also be in the spotlight, with April retail sales out on Wednesday, and major retailers Home Depot and Walmart reporting quarterly results.
Market volatility could spike in response to economic and company reports throughout the week, especially if inflation remains stuck at or near current levels and retail indicators point to a US economy that isn’t slowing down.
US PPI (April)
Tuesday 14 May: A key week for US inflation data begins with the producer price index (PPI) reading for April. PPI is a measure of inflation from the perspective of businesses and industries, measuring price changes before ordinary consumers buy the end product. That’s why analysts tend to see PPI as a bellwether of CPI. The latest US inflation data will be closely watched because any uptick could further delay the start of Federal Reserve interest rate cuts.
Economists estimate that in April PPI rose 0.3% month-on-month, up from 0.2% in March, and increased 2.1% year-on-year, flat compared to March. Meanwhile, core PPI – which excludes volatile items like food and energy – is expected to have climbed 0.2% month-on-month in April, the same rate as in March, and increased 2.3% year-on-year, cooling from 2.4% in March.
US CPI (April)
Wednesday 15 May: The consumer price index (CPI) reading for April is expected to show an easing in inflation. Economists estimate that prices rose 0.4% month-on-month, flat versus March, and increased 3.4% year-on-year, easing from 3.5% in March. Core CPI, which strips out food and energy costs, is expected to have risen 0.3% month-on-month and 3.6% year-on-year, down from 3.8% in March.
The CPI data typically influences the market more than PPI. What will matter most, though, is what the two reports combined tell us about the state of US inflation. Only once analysts have had a chance to review both reports will they begin using the data to figure out what it implies for the Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index, with that report due out on 31 May.
Both the PPI and CPI reports are likely to significantly impact rates and the dollar. Higher-than-expected inflation readings could push two-year Treasury rates back up towards the key 5% level, while lower-than-expected readings may send the two-year back towards the lows of the April jobs report near 4.7%.
GBP/USD is also likely to see significant price swings, especially if the inflation data comes in hotter than expected. A high inflation reading could imply that the Bank of England might cut rates before the Fed. This could lead to a further widening of the two central banks’ interest rate differential, pushing the pound back to the lower end of its trading range at $1.23 versus the dollar. Conversely, a cooler inflation report could spur the pound to rally towards $1.27.
US retail sales (April)
Wednesday 15 May: Retail sales are expected to have increased 0.4% month-on-month in April, cooling from 0.7% in March. However, the market reaction to US retail sales data, out on the same day as CPI, could be difficult to interpret, especially if the figures paint a mixed picture.
Therefore, insights from companies like Walmart may provide as much, if not more, information about spending trends. Walmart, the largest supermarket chain in the world by revenue, is due to report its fiscal first-quarter earnings on Thursday. The results are expected to show that Q1 earnings grew 7.1% to $0.52 per share, while revenue climbed 4.7% to $159.4bn. The group – which owns not only Walmart stores but also brands such as Walmart Supercenter and Sam’s Club – is expected to post total US same-store sales growth of 3.3%, with Walmart's same-store sales set to have grown 3.4%. Ticket growth is forecast at 3.2%, traffic is expected to have increased 1.3%, and e-commerce is expected to be up 3.4%.
With growth across these key data points, Walmart shares appear to be attempting to break out and head higher. The stock – up more than 10% year-to-date at about $60.40 – has cleared a downtrend and moved back above its 50-day moving average. With little overhead resistance, if the stock can push above $61.50 it could rise to new highs. However, a gap around $56 to $58 poses some downside risk. The stock could gravitate towards this area if the results disappoint investors.
Key economic and company events
Here’s our rundown of notable economic announcements and company reports scheduled for the coming week:
Monday
• New Zealand: Q2 Reserve Bank of New Zealand inflation expectations
• Results: Tencent Music Entertainment Group (Q1)
Tuesday
• Australia: Budget release
• UK: March unemployment rate, employment change, average earnings; April jobless claimant count
• US: April producer price index (PPI)
• Results: Alibaba Group Holdings (FY), Home Depot (Q1), Marston’s (HY), Sea Limited (Q1), Vodafone (FY)
Wednesday
• Eurozone: Q1 gross domestic product (GDP)
• Japan: Q1 GDP
• US: April consumer price index (CPI), retail sales
• Results: Britvic (HY), Cisco Systems (Q3), Dynatrace (Q4), Experian (FY), Imperial Brands (HY)
Thursday
• Australia: April unemployment rate, employment change
• New Zealand: Q1 PPI
• Results: Applied Materials (Q2), Baidu (Q1), BT Group (FY), Deere & Company (Q2), easyJet (HY), Premier Foods (FY), Sage (HY), United Utilities (FY), Walmart (Q1)
Friday
• China: April retail sales, industrial production
• Eurozone: April CPI
• Results: Land Securities (FY), RBC Bearings (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.
Index dividend schedule
Dividend payments from an index's constituent shares can affect your trading account. View this week's index dividend schedule.
Disclaimer: CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.
