The light week with CPI numbers!
A week after NFP usually is a very light week, with not much data. The week ahead also is the same, light and mostly about inflation numbers. At the same time, we should not forget that still, we have some concerns about the Covid situation all over the globe. However, investors still are optimistic about economic recovery by almost 90% success rate between the S&P 500 listed companies in the earnings reports.
Let's go and see what is waiting for us in the week ahead.
Chinese Inflation - Monday
Chinese economic recovery seems to be okay; however, it is a bit less than expected. The People's Bank of China recently decreased reserve requirements, backing the domestic economy to grow better. With the latest supports and improvements in Manufacturing, industrial and export numbers, we expect to see inflation increase in July, especially after a 0.4% contraction in June. Spreading virus cases in more than 30 cities increased a bit the risk level; however, it's not severe yet. After stable trading against the USD, the Chinese Yuan is weakening a bit, and it is expected to hold the current trend for this week.
US inflation - Wednesday & Thursday
With printing the highest level since 1991, US inflation in June raised to 5.4%, and the core price index also grew to 4.5%, driven mainly by used car prices. The producer Price index also saw a significant increase in June. This week on Wednesday and Thursday, we will have both consumer and producer inflation numbers, respectively. After last week's great numbers in the labor market, if inflation continues and increases, we have to wait for more pressure on Fed officials to announce tapering bond purchases even in September! Higher inflation, especially after such substantial NFP numbers, will cause a free-fall in Nasdaq and vice versa!
The UK GDP - Thursday
The UK is supposed to release its Gross Domestic Product numbers for the Second Quarter on Thursday. In the first quarter, the UK economy contracted -1.6%, much less than initial estimates. And now expectations are high for the second quarter. These higher expectations come especially after reading such a fantastic number of PMI and Retail Sales in the past months. Positive GDP numbers are supposed to help the Cable hold the current rates, as the US dollar also gets stronger.
And latest earnings
By now, we had 427 earnings report out of the SP500 listed companies. And according to Reuters, 87.6% of them beat the analyst estimates, which is the highest beating rate ever. We are waiting for exciting names in the week ahead, including SoftBank, Coinbase, Sysco, Wendy's, Walt Disney, and Airbnb. For SP500, even with positive reports of these companies, seeing higher levels will be a bit hard to estimate by the weekend, especially if we see the rising inflation number on Wednesday and Thursday.
