Welcome to Michael Kramer’s pick of the top three market events to look out for in the week beginning Monday 10 February.
Inflation and economic growth take centre stage in the week ahead, with updates on consumer price inflation from China and the US set to be followed by fourth-quarter gross domestic product readings from the UK and eurozone. As earnings season rumbles on, software services firm Cisco is among the big names due to report its latest quarterly results. Many traders will also be keeping tabs on results from Coca-Cola, Barclays, NatWest and Unilever.
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US January CPI
Wednesday 12 February
The US inflation figures for January are expected to show a slight easing in price pressures. Analysts estimate that consumer prices rose 2.9% in the year to January, the same rate of growth as in December, while core CPI – which excludes volatile food and energy prices – is expected to have cooled to 3.1% in January from 3.2% a month earlier. On a monthly basis, headline CPI is expected to have eased to 0.3% in January, down from 0.4% in December. However, core CPI is thought to have risen to 0.3% in January, up from 0.2% the previous month.
CPI inflation swaps for January are currently pricing in annual headline CPI growth of 2.9%, in line with analyst estimates. However, a lower-than-expected figure may lead the market to price in more rate cuts from the US Federal Reserve this year, which could be bearish for the dollar. Such a scenario would likely have the most significant impact on USD/JPY, as the pair has already fallen below support at ¥152.75. A surprise easing in headline CPI on an annual basis could weaken the dollar further against the yen, possibly pushing USD/JPY back below ¥150.
USD/JPY, May 2024 - present
Cisco Q2 results
Wednesday 12 February
Analysts estimate that Cisco’s fiscal second-quarter earnings grew 4.4% year-on-year to $0.91 a share, while revenue is expected to be up 8.5% at $13.9bn. Looking ahead to Q3, analysts expect the company to guide revenue growth of 9.1% to $13.8bn, with earnings increasing 1.8% to $0.90 a share.
The Cisco share price, up around 5% year-to-date at $62.27, as of Thursday’s close, is expected to move around 5.7% higher or lower post-earnings, based on options market pricing. That suggests the shares could trade in a range from $58.70 to $65.80.
The options market also shows a build-up of gamma levels at the $62.50 and $65 strikes, with calls significantly outweighing puts. This suggests that, once Cisco’s Q2 results are released and implied volatility drops, hedging flows may work against the Nasdaq-listed company, pushing the shares lower.
The stock is also approaching a resistance level around $64, which marks a 100% extension of a bull pennant pattern formed between October 2022 and August 2024. At the same time, the relative strength index indicates that momentum in the stock is beginning to fade. On this evidence, the stock looks overextended. If the company’s results are as expected, they may not be enough to push the stock past technical and options-related resistance.
Cisco Systems share price, August 2022 - present
UK Q4 GDP
Thursday 13 February
The UK’s economic growth – or lack of it – may come into greater focus than usual after the Bank of England cut its growth forecast while raising its inflation outlook at its rate-setting meeting on Thursday. The Bank also voted to cut interest rates by a quarter of a percentage point to 4.5% as it walks a tightrope between taming inflation and stimulating growth.
The BoE’s outlook highlights what appears to be a case of stagflation – a blend of stagnant growth and stubbornly high inflation. That view can be supported by movements in UK 10-year gilts, with the cost of government borrowing rising as the pound weakens against the US dollar. Tepid GDP figures would only strengthen the stagflation view, and likely accelerate the pound’s overall weakening trend, reversing any gains made since the start of the year.
In the past week, GBP/USD has tested resistance at $1.256 but has failed to break through that level. Meanwhile, support sits around $1.23, which could become the next target if the UK GDP report disappoints. A break below $1.23 could push GBP/USD even lower, potentially down to $1.20. On the flip side, better-than-expected GDP figures may propel GPB/USD to around $1.28.
GBP/USD, June 2023 - present
Key economic and company events
The coming week’s major economic announcements and scheduled US and UK company reports include:
Sunday 9 February
• China: January consumer price index (CPI)
Monday 10 February
• Australia: February Westpac consumer confidence index
• Results: McDonald’s (Q4), Vertex Pharmaceuticals (Q4)
Tuesday 11 February
• UK: Bank of England governor Andrew Bailey’s speech at The University of Chicago Booth School of Business in London
• Results: Coca-Cola (Q4), DoorDash (Q4), Dunelm (HY), Gilead Sciences (Q4), Marriott International (Q4), S&P Global (Q4), Shopify (Q4), Welltower (Q4)
Wednesday 12 February
• US: January CPI
• Results: AppLovin (Q4), Barratt Redrow (HY), Cisco Systems (Q2), CME Group (Q4), CVS Health (Q4), Equinix (Q4), Kraft Heinz (Q4), Reddit (Q4), Robinhood Markets (Q4)
Thursday 13 February
• Germany: January harmonised CPI
• New Zealand: Q1 two-year inflation expectations
• Switzerland: January CPI
• UK: Q4 gross domestic product (GDP)
• US: January producer price index (PPI), weekly initial jobless claims to 7 February
• Results: Airbnb (Q4), Applied Materials (Q1), Barclays (FY), British American Tobacco (FY), Brookfield (Q4), Coca Cola HBC (FY), Coinbase (Q4), Deere & Co. (Q1), Duke Energy (Q4), Moody’s (Q4), Motorola Solutions (Q4), Palo Alto Networks (Q2), RELX (FY), Renishaw (HY), Roku (Q4), Unilever (FY), Zoetis (Q4)
Friday 14 February
• Eurozone: Q4 flash GDP
• US: January retail sales, January industrial production, February flash Michigan consumer sentiment index
• Results: Moderna (Q4), NatWest (FY), Segro (FY)
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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