London, Monday, 24 July 2023
In a nutshell
It will be a busy week in the United States, focused on the Fed's interest rate decision, pre-estimated GDP growth in the second quarter, and the earnings of several large companies. Other important reports to be considered include personal incomes and expenditures, the PCE price index, orders for durable goods and S&P Global PMI readings. In addition, investors will closely monitor the interest rates of the European Central Bank (ECB) and the Bank of Japan (BoJ) and the interest rates of Germany, France, Spain and Australia. Furthermore, the GDP growth rates of South Korea, France and Spain in the second half of the year will be of considerable interest. Finally, flash PMI readings in Australia, Japan, France, Germany, the United Kingdom, and the euro area will be published, as well as the German IFO economic climate report.
In the United States, Fed policy makers are expected to raise interest rates by 25bps on Wednesday, which many investors believe will be the last of the current tightening cycle. This is due to a sharp cooling in inflationary pressure and signs of liberalization of the labour market. In terms of economic data, GDP in the United States is expected to grow by 1.6% in the second quarter, the weakest rate since the recession of the first half of 2022. Other economic announcements in June include personal expenditures and revenues, the PCE price index, durable goods orders, the flash S&P Global PMI survey, housing prices in Case-Shiller, employment costs index in the second quarter, new and pending housing sales, and consumer confidence updates from the Conference Board and the University of Michigan. Advance estimates of the trade balance of goods and wholesale stockpiles will also be discussed.
Finally, investors will closely monitor the earnings calendar of major technology companies such as Alphabet, Microsoft, Meta, Amazon, 3M, General Motors, Spotify, Verizon Communications, Snap, Visa, AT&T, automatic data processing, Boeing, CME Group, Coca-Cola, QuantumScape, Mastercard, McDonald's, Ford Motor, Intel, Chevron, Exxon Mobil, Procter and Gamble. In other parts of the United States, investors will be watching Canada’s monthly GDP data, as well as Mexico’s trade balance and unemployment.
In Europe, the ECB is expected to raise the main intravenous rate from 25 basis points to 4.25 per cent. In addition, market participants will monitor closely all indications of future interest rates adjustments, particularly given recentdovish remarks by ECB officials and inflation cooling, which has led to speculation that this could be the last increase in interest rates in the current cycle. In addition, flash PMI data are expected to show a recession in the euro zone economy in July. In Germany, preliminary CPI data for July are expected to show a decline in inflation after the acceleration of the previous month. In addition, the Ifo Business Climate indicator may have declined for the third month in a row in July, while Gfk's consumer sentiment may have improved. France and Spain are expected to release flash GDP data, and both countries are expected to record economic growth, but at a slower pace than the previous three months. Investors will also monitor the results of the Italian business survey and the leading indicators of the Swiss KOF.
In the UK, PMI data are expected to show that production in the private sector has increased at the slowest pace since March, due to the slowdown in services and another decline in manufacturing production.
In Asia, the decision on the Bank of Japan's monetary policy will be all but a focus, as signs of steady inflation and relatively robust growth could give the Central Bank a hint of future adjustments to its yield curve control policy. S&P Global will also release July PMI data. In China, the Chinese Communist Party's Politburo is expected to meet and discuss plans to stimulate economic recovery. Meanwhile, South Korea will publish its GDP growth rate and confidence index in July for the second quarter. In Australia, the key week of economic growth will focus on inflation in the second quarter, PMI figures in July, and retail sales in June.
(Research and edit by: The Decision Maker - Finance editors)