A big week lies ahead for the markets, with US inflation, the global fallout from Friday's major computer outage, the Trump comeback, Biden’s fade-out, investor nervousness about big techs (with the start of some significant earnings reports), and the endless speculation about a looming rate cut, which seems to be firming up at long last.
The CrowdStrike/Microsoft outage story will be a big talking point, with companies large and small expected to own up to some surprising impacts—especially airlines, some retailers, media companies, and financial groups such as banks and credit card companies.
Clients at several banks and brokerages couldn’t trade late Friday and for part of the weekend, so that will be a focus from today onwards, especially if we find there’s fallout in Asian markets, including Australia. The ASX’s company news platform was halted Friday afternoon.
There are also the valuable mid-month activity surveys across several big economies, such as Japan, the UK, parts of Europe, and Australia. These surveys are likely to show weak conditions.
The Trump comeback with his Vice President nominee, JD Vance, will grab headlines and continue to make more and more investors nervous, helping drive the rotation out of big tech stocks into old-fashioned value shares and smaller caps.
Inflation and interest rates come together on Friday with the latest private consumption expenditure data, especially the final consumption deflator inflation (PCEI). The AMP’s chief economist, Shane Oliver, says core PCE inflation is likely to come in around 0.2% month-on-month, "confirming the slowdown in inflation since March and adding to confidence that inflation is sustainably on track to fall back to the Fed’s 2% target.”
He said the annual inflation rate will likely be unchanged at 2.6%. The day before, the first estimate of US June quarter economic growth "is likely to show growth remaining subdued at around 1.8% annualized, reflecting continued soft growth in consumer spending.” Other forecasts have it around 2% at the moment. GDP grew 1.4% in the first quarter.
US home sales and durable goods orders for June will also be out this week.
The June quarter earnings reporting season will start to ramp up with consensus expectations for a 7.3% year-over-year rise in earnings, which is likely to end up being around 10% year-over-year again. Excluding tech, the consensus expectations are for 2% year-over-year growth, according to Dr. Oliver.
Quarterly earnings will also flow from other economies such as the EU, UK, and Japan.
In Canada, there’s a chance the Bank of Canada (Wednesday) will cut interest rates for a second time, reflecting the fall in its inflation rate.
Dr. Oliver says the money market has priced in a 72% chance of a cut in August, and one is fully priced in for September.
In Australia, there’s detailed labor market data to be released on Thursday that will reveal where the strong growth last month occurred. Macquarie Group holds its annual meeting on Friday, and it usually provides a limited first-quarter and half-year update ahead of the meeting.
Woodside Energy releases its June half-year and quarterly report on Tuesday, while Northern Star Resources is scheduled to release its quarterly and full-year production report on Thursday. Newmont, which owns gold and copper miner Newcrest, also reports this week.
