Outlook for the Week Ahead

See the major geopolitical events, economic data releases, and potential market-moving catalysts in the week ahead.

It is going to be jam-packed week ahead, with a cascade of earnings data, geopolitical summits, economic data releases and central bank decisions which may induce cross-asset volatility.

Let’s take a look⬇️

Earnings for the week:

America Movil, BlackRock, Cintas, Citigroup, Delta Air Lines, DNB Bank, Fast Retailing, Fastenal, HCL Technologies, JPMorgan Chase, PepsiCo, Progressive, Qatar National Bank QPSC, Seven & i, Tata Consultancy Services, UnitedHealth Group, Wells Fargo (per Bloomberg).

Saturday

US Treasury Secretary Janet Yellen is in China through Sunday for meetings with senior government officials. The visit comes after Secretary of State Antony Blinken’s high-level talks with Xi Jinping which yielded little diplomatic fruit.

Tension between Washingtion and Beijing have been rising, and will likely to continue to escalate after China passed the new Foreign Relations Law. Comments from Yellen are not likely to be market-moving, and no major breakthroughs are expected. A hegemonic rivalry seldom ends through diplomacy.

ASEAN foreign ministers and their counterparts from the US, China, Russia and other key partners are going to meet in Jakarta. The conference comes amid escalating tension not only between China and the US but Indo-Pacific allies e.g. Japan. Mr. Blinken will be attending, and will “address economic cooperation, the global fight against climate change, the ongoing crisis in Burma, the situation in the South China Sea, and Russia’s war against Ukraine.”

Monday

CPI and PPI data out of China on a year-on-year basis is expected to come in low, with preliminary forecasts of 0.2% and -5.0%, respectively. Economic growth from the Asian giant has disappointed Wall Street, which was expecting a boom in economic activity after lockdown measures were eased.

A weak inflation reading would only buttress mounting fears of an economic slowdown in the world’s second-largest economy. These concerns are spilling over into the broader Asia region, as we see below⬇️

Advanced GDP data out of Singapore, the financial hub of Asia, is expected to show 0.4% growth for Q2 on a year-on-year basis, and a seasonally-adjusted, quarter-on-quarter contraction of -0.2%. With China as the country’s largest trading partner, weaker economic activity emanating from the region’s behemoth and tighter financial conditions means Singapore is facing cold winds from both sides.

Sweden’s central bank, the Riksbank, will be publishing minutes from its June 28 meeting. A key theme to look out for will be Sweden’s property markets. Some analysts are forecasting a major downturn in the Nordic country’s hot housing market. Construction costs have increased by about 50 percent relative to consumer prices, while most similar countries have seen an increase of between 10 and 20 percent, according to data from Nordregio.

Source: DailyFX

The concern is related to debt: The average debt-to-income ratio of Swedes in the past 5-7 years has reached as high as 406 percent, with mortgages playing a key role.

Tuesday

Brazil’s IBGE inflation IPCA on a year-on-year basis for June is anticipated to show a 3.15% reading, almost 80 bps lower than the prior figure at 3.94%, the lowest level since Q1 2020. The Brazilian Banco Central do Brasil, Brazil’s central bank, has hiked rates up to 13.75%, the highest since 2016 to fight inflation, which peaked at over 12% in April 2022. Consequently, monitoring price growth developments will be crucial vis-a-vis monetary policy.

NATO holds its annual summit in Vilnius, Lithuania, through Wednesday. Whether alliance members create a clear path for Ukraine to eventually join will be a major focus. Russia for decades has made it clear that a red line is Ukraine joining NATO. Russian President Vladimir Putin has cited NATO's expansion towards Russia's borders over the past two decades as a key reason for his decision to send tens of thousands of troops into Ukraine.

Admitting NATO would almost certainly lead to a more confrontational war and a rapid escalation in tension, possibly to a nuclear level. If Article 5 is to mean anything, admitting Ukraine would be tantamount to NATO promising to fight at its side. This would lead to a rapid escalation and risk of entering WWIII. No one in the West is interested in this.

Wednesday

The Bank of Canada (BoC) is expected to raise rates by 25bps, bringing it to the highest level since 2001. Guidance on subsequent policy will be crucial to monitor.

US year-on-year CPI for June is expected to show a 3.1 percent reading, far below the previous 4 percent print for May. This will be a highly-anticipated, and closely-watched indicator because of its implications for Fed policy. Read more here.

The US Federal Reserve will be issuing its Beige Book on the regional economic survey. For those not familiar, this report “provides recent anecdotal information on current economic conditions; this is important since many of the key regional economic statistics—personal income and gross state product are two examples—are only released after a significant lag”.

Thursday

Thailand will hold a joint session of parliament to select a prime minister. The leading candidate is Pita Limjaroenrat, head of the Move Forward party. His alliance falls 64 votes shy of the 376 required, and faces resistance from potentially 250 lawmakers who lean conservative, and were appointed during the era of military rule.

The Bank of Korea is anticipated to hold the 7-day repo rate at 3.50%, amid growing concerns of household debt. The effect of the Fed’s rate hike crusade will also likely feature in the central bank’s macroeconomic assessment; specifically, the multi-iterated impact of a more expensive dollar. According to Bloomberg data, “Korea’s policy rate is already 175 bps below the Fed’s a record negative differential”.

Friday:

University of Michigan consumer sentiment for July will be published, with a forecast of 65.5, slightly above the 64.4 reading from June. This indicator surveys the perceptions of consumer’s personal finances, the economy business conditions, etc. With growing talks of a recession brought on by Fed tightening amid a stubborn labor market, the reading and insights could inspire small-scale market volatility. This will be contextual based on the reading of the indicator as well as the data preceding it e.g. US CPI.

None of the above constitutes financial advice.