Tensions and inflation
After a busy week with central banks' meetings in the US, UK, and Australia and employment data from the most developed economies, in the week ahead, with fewer data and events, our focus mostly will turn back to geopolitical tensions and inflation numbers.
1- Chinese Trade Balance - Monday
The trade balance in Chinese is one of the leading energy market drivers. With the latest lockdown in Shanghai, both Exports and Imports are expected to fall with more decline in the imports, which makes the trade balance positive. Also, as the most prominent global factory, more export means more consumer spending in other economies. Data in the week ahead will lift the Chinese Yuan against its crosses.
2- Economic Sentiment in Europe - Tuesday
The current situation or the outlook index in Eurozone and Germany should finally reflect the war effects on their economic activities. Inflation is increasing, and conflicts in Ukraine do not seem fleeting. Many investors and analysts are looking for the stagflation risks signs in the ZEW report. These data should not be positive for the Euro against its crosses.
3- Inflation Day - Wednesday
Wednesday ahead is the inflation day with CPI data in China, Germany, and United States. While in China, CPI is still expected to hold under 2% with 8.3% producer inflation, and it still does not seem to be a problem, In Germany and United States, it is expected to be slightly reduced from recent peaks. After last week's FED decision, if we see the lower inflation, it must be positive for the US stock markets and destructive for the US dollar. But if we miss the expectations, then bears would be more aggressive.
4- UK GDP - Thursday
UK's 2022 first-quarter GDP is not expected to be shiny, with slower growth in February, as GDP inched up by only 0.1%. After advancing 1.3% in Q4-2021, the consensus expects GDP growth is down to 1.0% for this quarter. Industrial and manufacturing production numbers also are expected to fall in the same period. Expected numbers together would not be positive for the UK stock markets.
5- US Producer inflation - Thursday
Like consumer inflation, producer inflation is also expected to ease after recent peaks. Energy price and average wages both lessened, which means lower production costs. Recently in March, PPI tested its peak, and now we can see some softer numbers; however, will that continue or not? We have to wait and see. Lowe producer inflation will support the stock market positive sentiment and vice-versa.
6- University of Michigan Consumer Sentiment - Friday
One of the most essential indexes, which was moving against market happenings, was the US consumer sentiment. We are waiting to see that after a surprising increase in April by almost six points to 65.2, May's consumer sentiment can provide more information on whether consumers' recent optimism has any legs or not. The critical point in April was that it was declining from previous months despite the annual growth.