The Eurozone is set to release its first estimate of inflation for August, offering clues about the ECB's interest rate decision in September. Nvidia's earnings results will also be in the spotlight as investors seek to gauge the trajectory of the AI industry.
ADVERTISEMENTThis week, several influential economic data releases and company earnings reports are expected to shape market trends.
In the Eurozone, the preliminary estimate of the Consumer Price Index (CPI) for August will be closely watched.
In the United States, another critical inflation measure, the Personal Consumption Expenditure (PCE), is due for release. Additionally, artificial intelligence giant Nvidia is scheduled to report its quarterly earnings results.
Europe economic events
The Eurozone's flash inflation data for August will take centre stage this week. Following a stubbornly high consumer price reading in July, this data is crucial for the European Central Bank as it considers its next interest rate move.
Annual inflation rose to a six-month high of 2.6% in July, with core inflation - excluding volatile items such as food, energy, alcohol, and tobacco - remaining at 2.9% year on year for the third consecutive month, as price pressures in services persisted.
Consensus suggests that inflation will cool rapidly to 2.2% in August, enhancing expectations for the ECB to continue cutting interest rates for the remainder of the year.
Major economies, including Germany, Italy, and France, will also release their flash CPI data for August.
Recent data showed that inflation in Germany and France rose to 2.3% and 2.2%, respectively, in July.
Consumer prices in Italy jumped to a four-month high of 1.3%, up from 0.8% in the previous month. According to consensus, inflation in France may further elevate due to the Paris Olympics, while German CPI could subdued in August.
Additionally, Germany will release its final GDP figures, which are expected to confirm a slight contraction of 0.1% in the second quarter.
France is due to release its preliminary GDP for the second quarter, with expectations that the growth rate will remain at 0.3% quarter on quarter. However, the Bank of France has indicated that the Paris Olympics could boost economic growth by up to 0.25% in the third quarter.
US economic events
The market's attention will be on the Personal Consumption Expenditures (PCE) data for July, which is due for release this week and is regarded as the Federal Reserve’s preferred inflation gauge.
The PCE decreased to 2.5% year on year in June, down from 2.6% in the previous month, with a modest 0.1% month-on-month increase, indicating that inflationary pressures are easing in the US.
The annual Consumer Price Index (CPI) release earlier in the month also showed signs of cooling inflation, bolstering expectations that the Fed will commence a rate-cut cycle in September.
The US will also release the preliminary GDP figures for the second quarter, representing the second estimate by the US Bureau of Economic Analysis.
ADVERTISEMENTThe advance reading indicated that economic growth accelerated to 2.8% in the second quarter, up from 1.3% in the previous quarter. This data suggests that the world's largest economy may have achieved a soft landing during the rate-hike cycle of the past two years.
Additionally, Nvidia, the world's largest AI chip maker, is set to release its earnings results for the July quarter.
The company has been the biggest beneficiary of the AI boom, and its data centre sales revenue will be closely scrutinised by investors to justify its market valuation. Earnings per share are forecast to be $2.69 (€2.42), representing a 107% surge from the same quarter last year.
Asia-Pacific economic events
In Asia, attention will be focused on China's manufacturing and non-manufacturing PMIs for August. Recent Chinese economic data has been mixed, pointing to modest economic growth.
ADVERTISEMENTManufacturing activity contracted for the third consecutive month in July, while export growth slowed to 7% in July, down from 8.6% in the previous month. Meanwhile, the non-manufacturing PMI expanded at its slowest pace since November 2023.
Australia is set to release its monthly CPI data for July, a crucial economic gauge for the Reserve Bank of Australia's rate decision in September.
Consensus forecasts suggest that inflation will ease to 3.6% year-on-year in July, down from 3.8% in the previous month. However, this level is expected to remain well above the RBA's target of 2%.
Additionally, Japan's core CPI data for July will be closely watched as a key indicator of the Bank of Japan’s policy direction. The data is forecast to remain steady at 2.1% year-on-year, the same level as the previous month.
ADVERTISEMENTThe Bank of Japan initiated a rate hike in March and ended the negative interest rate policy that had been in place since 2016. In July, the bank unexpectedly continued raising the policy rate, which triggered global market sell-offs.
