US spotlight of the week
The main market movers this week will be some US data, starting from Wednesday’s figures on American inflation in June, fundamental for understanding the Fed’s moves.
Also from the US, June producer prices are expected on Thursday, which will provide information on factory price lists and therefore on the future evolution of inflation. On Friday, will be the turn of retail sales, to be assessed in light of the weakness in consumption recorded in recent months.
Again on Friday, China will release data on industrial production and retail sales in June, as well as second-quarter GDP figures, which is expected to contract on an annual basis due to the ‘zero cases’ policy on Covid-19.
On the equity front, from Thursday onwards, markets will be influenced by the opening of the US companies quarterly season with the earnings from US banking giants including JPMorgan, Wells Fargo, Citigroup and Morgan Stanley.
US Inflation
As anticipated, the highlight of the week is US inflation, expected on Wednesday. The forecast is that consumer prices inflation will be at 8.8% on an annual basis in June from 8.6% in May. Market expectations are therefore already high, especially due to the “boom” in gasoline prices which in the US are around $5 a gallon. On the other hand, the “core” figure, i.e. the inflation which excludes energy and food prices, is expected to slow slightly due to the absence of pressures on used cars.
US retail sales data, considered a proxy for consumption, are expected to rise slightly, and these data will be showed next Friday. The forecast is for a 0.9% monthly increase, after the decrease of 0.3% in May. An important figure is that of retail sales excluding the price of gasoline, which in the US has risen very consistently. The forecast is that these sales ex cars will rise by 0.3% on the prior month, after increasing by 0.5% in May.
Political News
On the political side, US President, Joe Biden, will leave on Wednesday for a 4-day trip to the Middle East, where he will ask Gulf producing Countries to pump more oil barrels. Biden will visit Israel on his way to Saudi Arabia, where he will seek to mend ties with the Crown Prince, Mohammed Bin Salman, after heavily criticizing him for human rights violations, particularly in connection with the murder of Jamal Khashoggi, the Arab journalist killed by Saudi intelligence in Turkey.
The price of WTI – the US benchmark – last week fell below $100 a barrel but then it rebounded due to fears about Russian supplies to Europe. Crude oil will revolve around Biden’s journey this week. The trip of the US president will not be a “walk in the park”, both because of Washington’s past disagreements with Bin Salman and because of the delicate balance that Riyadh must maintain with Moscow within OPEC +.
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