APAC Week Ahead: a technological spring?

JU.S. stock markets shrugged off recession fears, with the S&P 500 and Nasdaq gaining for five straight trading days last week. The tech-heavy index, the Nasdaq, outperformed all other major indexes, up more than 4% in a week. Inflation expectations are lowered, thanks to the recent rout in the commodity market, although the troubled economic outlook remains unchanged. Despite central bankers’ constant hawkish stance, bond traders no longer appear to be aggressively setting higher rates as benchmark US bond yields on 10- and 2-year bonds remained inverted for almost a week. whole, repeatedly warning of an unavoidable economic situation. coming recession, or the world’s largest economy is already in a technical recession. With earnings season kicking off in the US, performance results will tell whether companies have weathered the economic storm.

Performance of the main indices over the last 5 trading days

Source: TradingView as of July 9, 2022 (Click to see enlarged table)

This week, we continue to monitor the global macro trajectory from a variable financial market perspective. The CMC Markets Q3 outlook report will be released on July 12, along with the US company’s earnings stories to give you a forward-looking view of key trends.

Key instruments

Key Economic Data and Events (July 11 – July 15)

United States – CPI, PPI, retail sales, preliminary UOM consumer confidence (June)

The U.S. Consumer Producer Index (CPI) for May came in at 8.6% year-on-year, the highest since December 1981. The core CPI, excluding food and energy, was 6 .0%, also above expectations. Energy has certainly been the main contributor to the surge in inflation. CPI data for June to be released on Wednesday is expected to be even higher at 8.8% from a year ago, according to Thomson Reuters. Coupled with stronger than expected US nonfarm payrolls data released on Friday, the odds of the Fed raising the interest rate another 75 basis points in July have been bolstered. However, falling consumer sentiment, falling manufacturing PMIs and falling commodity prices could suggest inflation may be peaking, prompting the Fed to suspend aggressive rate hikes from September.

The Producer Price Index (PPI), Retail Sales and Preliminary UoM Consumer Confidence will also be released this week. As for the retail trade figure, the consensus is for 0.8% m/m versus -0.3% the previous month, a jump from a month ago. But the real power of consumers has been softened by the inflation figure of 8.6%. PPI data is expected to grow at the same level as in May, remaining at 0.8% m/m.

China – Q2 GDP

China’s first-quarter GDP is 4.8% year-on-year and growth may have been significantly slowed due to strict lockdowns in major cities in the second quarter. Both the World Bank Group and the OECD have lowered their expectations for China’s GDP growth in 2022 to 4.3-4.4% from over 4.5%. But China’s recent PMI indices for May and June beat estimates, suggesting the second-quarter GDP figure may not be as weak as expected. China’s trade balance data will also be released ahead of the GDP figure, which will help gauge the world’s second largest economic growth trajectory.

New Zealand – RBNZ Rate Decision

With first-quarter inflation at 6.9%, the highest in decades, the Reserve Bank of New Zealand will be more likely to keep pace with a 50 basis point rate hike this week, which will be the third consecutive time since April. . The RBNZ leads the rate hikes of all major Western central banks. However, local business and consumer confidence plunged to near-record lows due to rapidly rising rates and a gloomy global economic outlook. Weaker demand from China has also increased pressure on its export prices, which could lead to a further contraction in GDP in the second quarter after the negative growth in the first quarter.

Canada – BOC political meeting

The Bank of Canada is widely expected to raise the interest rate by 75 basis points this week as Canadian inflation expectations hit a new 40-year high of 7.7%. Canada’s robust labor markets will also support an acceleration in the pace of rate hikes, with bond markets pricing in another 75 basis point hike in September.

Australia – employment (June)

Australia is expected to create 30,000 new jobs in June, with the unemployment rate down to 3.8% from 3.9% the previous month. The strength of the local workforce will keep the RBA’s rate hike trajectory on track after the second 50bp hike last week.

Upcoming European Week

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