Weekly Outlook, 9-13 January

US inflation is in focus!

After slowing inflation in Europe and mixed economic data from the United States, US inflation will be the key market driver in the week ahead. However, the United Kingdom will also have a busy week with much data to watch, but in other parts of the world, we will have a quiet week. Let us review the most important events and data to watch in the week ahead.

Japanese data – Tuesday

Household Spending and Tokyo Inflation numbers will be out on Tuesday, and we are waiting to see, with increasing inflation, Japanese spending less. While Tokyo's inflation is expected to rise by 3.8% annually in November, the inflation-adjusted value of all consumer expenditures is supposed to fall by 0.5%. Expected increasing inflation means that the Japanese central bank can consider some changes in its ultra-easy policies while the government is trying to raise wages to deal with rising prices. Japanese Yen should get supported with estimated data.

Australian inflation & Retail sales – Tuesday

Like most developed economies, except Japan and China, Q4 inflation is expected to slow down. Australian inflation for Q4 was estimated at 7%, down from 7.3%, to help the Consumer to buy more and raise retail sales by o.7% in November, while the month before, it was falling by -0.2%. The Australian stock market should get supported by these data, the same as the Australian dollar.

China inflation – Thursday

The busiest day of the week starts with Chinese inflation. Both Consumer and producer inflation numbers are expected to rise in December compared with November. However, 1.8% CPI and -0.1% PPI are way less than other economies, which can help the government to issue a stimulus package worth more than $143 billion to support its semiconductor industry, which would be one of its biggest-ever fiscal incentive packages, and not worry about inflation. Chinese stock markets can have good days in the coming months.

US inflation - Thursday

After mixed employment data, now investor looking at CPI numbers to find out what they should expect from the FOMC meeting at the end of January. With gasoline prices falling almost 12.7% and economic growth slowing in recent months, it is expected to see the 2022 inflation ends at 6.5% in its last month, which would be a 14-month low. Core inflation is also likely to fall to 5.7% annually, but on a monthly scale, it can rise by 0.3%, 0.1% more than November inflation. Expected data support a less hawkish Fed, increase the stock markets, but pressure the US dollar.

UK data- Friday

This Friday is a British day with GDP, Trade data, and industrial and manufacturing production numbers on Calendar. For November, Industrial and Manufacturing Productions are expected to contract further at -0.3% and -0.2%, respectively. After an unexpected -0.3% contraction in Q3, expectations for the last quarter cannot be promising in connection with the GDP. The only optimal number can be the trade balance. Of course, in this case, a better trade balance is primarily because of fewer imports, which means the domestic economy is struggling. Expected data would not be in favor of the UK stock markets.

US Consumer Sentiment – Friday

While the labor market is totally recovered, and now even though it is much better than pre-pandemic, inflation started to slow down, and incomes increased, consumer sentiment remains well below pre-pandemic levels, according to the University of Michigan's survey. Consumer expectations for the year ahead fell to the lowest annual rate in the last 18 months, but if inflation continues to cool further, consumer sentiments can also increase. For January, consensus expectations are for consumer sentiment to rise to 60.5. Better sentiment will be in favor of stock markets and vice-versa.