US equity markets extended gains this week, with the Dow Jones trading above 40,000 for the first time. These gains were supported by cooler inflation and retail sales data, which boosted expectations of multiple Federal Reserve rate cuts before year-end.
The ASX 200 locked in a fourth consecutive week of gains, approaching its record high of 7,910. These gains were bolstered by the Federal Budget, which struck the right balance between providing cost-of-living relief and not exacerbating persistent inflation. Additionally, signs of cooling in the labor market have raised the possibility of a rate cut by the Reserve Bank of Australia (RBA) before year-end.
- In the US, headline inflation dropped to 3.4% YoY from 3.5%. Core inflation fell to 3.6%, its lowest in three years
- Crude oil gained 0.86% this week to trade at $78.93 per barrel, bolstered by expectations of Fed rate cuts following cooler economic data
- Gold gained 0.78% to $2379 as the US dollar and US yields eased
- Wall Street's fear gauge, the VIX index, eased to 12.41 from 12.56 prior
- In the UK, the unemployment rate rose to 4.3% from January to March 2024, up from 4.2% in the prior three months
- The unemployment rate in Australia rose to 4.1% in April from 3.9% prior
- Australian wages rose 0.8% in Q1 2024 and 4.1% for the year, missing the 4.2% forecast
- In Japan, Q1 2024 GDP shrank 0.5%, missing market estimates of a 0.4% fall
- AU: Westpac Consumer Confidence (Tuesday, 21 May at 10:30pm AEST)
- AU: RBA Meeting minutes (Tuesday, 21 May at 11:30am AEST)
- NZ: RBNZ Interest Rate Decision (Wednesday, 22 May at 12:00pm AEST)
- NZ: RBNZ Press Conference (Wednesday, 22 May at 1:00pm AEST)
- AU: Balance of Trade (Friday, 24 May at 8:45am AEST)
- CN: Loan Prime Rate 1Y and 5Y (Monday, 20 May at 11:15am AEST)
- JP: Inflation Rate (Friday, 24 May at 12:00pm AEST)
- US: Fed Chair Powell Speech (Monday, 20 May at 5:30am AEST)
- US: FOMC meeting minutes (Thursday, 23 May at 4:00am AEST)
- US: S&P Global Composite Flash PMIs (Thursday, 23 May at 11:45pm AEST)
- US: Durable Goods (Friday, 24 May at 10:30pm AEST)
- UK: Inflation (Wednesday, 22 May at 4:00pm AEST)
- EA: HCOB Flash PMIs (Thursday, 23 May at 6:00pm AEST)
- UK: S&P Flash PMIs (Thursday, 23 May at 6:30Pm AEST)
- UK: Retail Sales (Friday, 24 May at 4:00pm AEST)
Source: Getty Images
AU
RBA meeting minutes
Date: Tuesday, 21 May at 11.30am AEST
The minutes from the Reserve Bank of Australia (RBA)'s May meeting are scheduled to be released on Tuesday, 21 May at 11.30am. At its board meeting in May, the RBA kept its official cash rate on hold at 4.35%, as widely expected. Despite a higher-than-expected Q1 inflation read, the bank was less hawkish than feared as it retained a balanced bias, noting that it is not "ruling anything in or out".
The RBA revised its inflation forecasts for this year higher, leaving its inflation forecasts unchanged for the end of 2025, and the end of 2026. At the same time, the RBA revised its growth and unemployment forecasts slightly lower. The minutes will be closely scrutinised to determine what options the RBA board considered at its meeting in May; and any clues behind the bank's less hawkish than expected tone.
RBA cash rate
Source: RBA
UK
Inflation
Date: Wednesday, 22 May at 4.00pm AEST
In March, the headline annual inflation rate in the UK fell to 3.2% YoY from 3.4% prior, its lowest rate since September 2021. The annual core inflation rate, which excludes volatile items such as energy and food, dropped to 4.2%, the lowest since December 2021.
Inflation's steady progress back towards the Bank of England (BoE)'s target has played a significant role in the bank's dovish tilt, which sees the rates market 50% priced for a 25 basis points (bp) rate cut in June with a full 25bp rate cut priced by August.
The market's preliminary expectation for this month (April) is for headline inflation to ease to 2.7% YoY and for core inflation to fall to 3.6%. If correct, this should increase the chances of a rate cut in June.
UK inflation rate
Source: TradingEconomics
US
FOMC meeting minutes
Date: Thursday, 23 May at 4am AEST
At the latest Fed meeting, US policymakers kept interest rate unchanged at 5.25%-5.50% in a widely expected move. Fed Chair Jerome Powell indicated a high threshold for additional rate hikes, but he also highlighted a “lack of further progress” towards its inflation objective and wants to seek for greater confidence before considering rate cuts. This has been echoed by a slew of Fed officials’ comments lately, with the high-for-longer rate outlook likely to be reiterated in the upcoming minutes.
That said, the minutes may be slightly backward-looking, given that it will not factor in the weaker run in economic data following the meeting. Weaker-than-expected US job gains for April and further easing in consumer inflation this week may be perceived to offer some leeway for the Fed to consider earlier rate cuts. Nevertheless, clues will be sought from the minutes on the timeline for Fed’s cuts and policymakers’ views around the inflation and growth outlook.
Fed funds rate
Source: Refinitiv
JP
Inflation rate
Date: Friday, 24 May at 12.00pm AEST
While Japan’s March inflation data has shown some signs of cooling, pricing pressures have been staying above the Bank of Japan (BoJ)’s 2% target for the past two years. Headline inflation read for March stood at 2.7% year-on-year, while core inflation stood at 2.6%.
Slow inflation progress towards target may explain the BoJ’s decision to revise up their inflation outlook at the April policy meeting. For its economic forecasts, the central bank revised its FY2024 core inflation to 2.8% from previous 2.4%, while FY2025 projection was revised to 1.9% from previous 1.8%.
BoJ Governor Kazuo Ueda earlier said that the central bank would raise interest rates if fresh data back up its latest price forecasts or if inflation overshoots the projections. For now, expectations are for Japan’s April headline inflation to show further easing to 2.5% from previous 2.7%, which may support more patience for the BoJ in their policy normalisation process.
Japan’s inflation rate % YoY
Source: Refinitiv
Q1 2024 Earnings season
The Q1 2024 earnings season continues this week, with companies scheduled to report, including Zoom, Target, Lowe, Snowflake and the one everyone’s been waiting for, NVIDIA.
Release dates
Source: Eikon
