Monday 27 May
- UK spring bank holiday
- European economic surveys
European economic surveys will be released Monday with eyes on the European Central Bank meeting on 6 June.
Some expect the ECB to cut rates from 4.5% to 4.25% following the June meeting, while analysts expect the US Federal Reserve to hold until September.
Russ Mould, AJ Bell investment director, Danni Hewson, AJ Bell head of financial analysis, and Dan Coatsworth, AJ Bell investment analyst, said: “This would mark a major departure in approach, as the ECB has tended to take a much tougher line than its US counterpart – the European monetary policy authority actually raised interest rates in 2008 (as the Great Financial Crisis was ripping around the world) and again in 2011, even as the European Debt Crisis had started to break. That said, it has tended to act after the Fed, rather than before it.”
Currently, inflation in the EU sits at 2.4%, slightly above the 2% target. The European Commission has forecasted a return to 2% by the second half of 2025. Two other benchmarks for the European economy will be seen through the Germany’s Ifo and Belgium’s Courbe Synthetique survey.
In Germany, the economy has shrunk half of the last eight quarters, but April produced a headline Ifo of 89.4%, the highest in almost a year since May 2023. The Courbe Synthetique, however, fell to a -11.9 reading in April.
“This is intriguing as the Courbe had a reputation for providing pretty good record of acting as a lead indicator for the Euro Stoxx 600 equity index,” Mould, Hewson, and Coatsworth said.
“Quite why the views of a few thousand Belgian industrialists offered such a telling picture remained a matter of conjecture and the relationship has not been quite so strong of late – the Courbe still stands well below its pre-pandemic high of 1.2, reached in February 2018, yet the Euro Stoxx 600 trades at an all-time high. Even so, the Belgian indicator is off its low and showing some positive momentum.”
Tuesday 28 May
- British Retail Consortium shop price index
- Japanese inflation figures
- US Case-Shiller house price index
- US Conference Board consumer confidence index
Wednesday 29 May
- Full-year results from Pets At Home
- German inflation figures
- US Federal Reserve Beige Book
- In Europe, quarterly results from Telecom Italia
- In the USA, quarterly results from Salesforce, Agilent, HP Inc, Chewy, American Eagle and Abercrombie & Fitch
Thursday 30 May
- Full-year results from Auto Trader, Renewi, Londonmetric Property and Dr Martens
- Trading update from Bodycote
- German unemployment
- US Q1 GDP growth (second estimate)
- US pending homes sales
- US oil inventories
- US weekly initial unemployment claims
- In the USA, quarterly results from CostCo, Dell, Marvell Technologies, Dollar General, ZScaler, Hormel Foods, Cooper, BestBuy, Birkenstock, Gap, Nordstrom, Kohl’s and FootLocker.
Friday 31 May
- UK mortgage approvals
- UK Nationwide house price index
- Chinese purchasing managers’ indices (PMIs) for manufacturing and service industries
- EU inflation
The US Personal Consumption Expenditure index will be released on 31 May as markets attempt to estimate when a rate cut will be announced by Fed chair Jerome Powell.
Throughout 2024, rate cut expectations have decreased to a third of beginning estimates, with markets now expecting a cut in September. In April, the Consumer Price Index had a 3.4% year-on-year increase, slightly levelled from March’s 3.5% increase. Producer price, however, jumped to 2.2%, which was the largest increase of 2024, and the Personal Consumption Expenditure Index ticked up to 2.7% in March compared to February’s 2.5%.
“Besides the reading itself, it will be interesting to see how the markets move in response to it. At the time of writing, markets are putting a 64% chance on a rate cut in September and a 56% probability on a second rate cut by Christmas, but those are not numbers that are commensurate with high levels of conviction,” the AJ Bell trio said.
“The US economy continues to grow (helped by galloping, deficit-funded spending from the Biden administration), unemployment is below 4% and wage growth is running above 4%. The economy is also getting a tailwind from the cancellation of $130 billion on student debt and a surge in both share and house prices that are creating something of a wealth effect. Despite Mr Powell’s protestations that monetary policy is tight, other indicators suggest it is still loose, and that a rate cut might not be entirely warranted.”
Two additional factors for the Fed have been job vacancies and unemployment, with headline unemployment rising 0.5% from January 2023.
