It could be make or break time for US interest rates next week when the Federal Reserve’s preferred inflation gauge is released on Friday. The Personal Consumption Expenditure Price Index (PCE) has fallen from 2.7% in March to 2.6% in May. It could drop again to 2.5% in June, which might provide the Fed with more evidence that inflation is trending downwards.
Meanwhile, Singapore’s inflation rate is expected to have moderated from 3.1% in May to a nine-month low of 2.9% in June. Staying in Singapore, the unemployment rate could have edged up in the second quarter, whilst industrial production in June could have slowed appreciably from a growth rate of 2.9% in May.
Corporate news
The attention next week will switch from US banks’ earnings to a pair of Magnificent 7 stocks, namely, Alphabet (Nasdaq: GOOG) and Tesla (Nasdaq: TSLA).
Alphabet, the parent of Google, will need to demonstrate that there is more to its pursuit of AI than just hype. In April it said that its capital expenditure had almost doubled to US$12 billion, as it hopes to dominate the AI space with its large language model Gemini. Investors, however, will probably want to know how long it will take for these investments to pay off.
Tesla can probably never compete on cost with China’s state-subsidised car manufacturers. So, it shouldn’t even try. Instead, it should focus on innovation, which is its forte. Consequently, investors’ attention could be focused on the progress of its autonomous robotaxis. In July, the company pushed back the date of its robotaxi event from next month to October because of a design change.
Embattled consumers
Away from the tech sector, dividend aristocrat Coca-Cola (NYSE: KO) has been able to pass on price increases relatively successfully. But how long can this possibly go on for as American household budgets are showing signs of strain? We could find out when Coca-Cola reports first-half numbers. Meanwhile, Coca-Cola’s China sales could disappoint again, as the country’s once-prosperous households have been weighed down by a number of government missteps.
Unilever (NYSE: UL) could also provide some useful insights into the spending patterns of global consumers. In April, the company not only reported a 4.4% rise in first-quarter underlying sales growth but it said that underlying volume grew 2.2%. It has also been able to raise prices by 2.2%.
3M (NYSE: MMM) is expected to report lower second-quarter revenue and profit. Shorn of its healthcare business and litigations over its forever chemicals and faulty earplugs now behind it, 3M expects to return to organic growth. However, its home improvement and consumer safety products have been a drag. That said, transportation and electronics were a bright spot in the first quarter.
In April, ParkwayLife REIT (SGX: C2PU) posted a 4% increase in first-quarter distribution even though gross revenue declined 2.7% and net property income slipped 2.8%. The falls were attributed to depreciation of the Japanese yen, which the landlord said were hedged.
CapitaLand Ascott Trust (SGX: HMN) will reveal whether the good times at the hospitality trust can continue. In April, it said that gross profit rose 15% year on year, whilst revenue per available unit (RevPAU) improved 6%. The trust said RevPAU increased in all of its key markets.
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Disclosure: Coca-Cola, 3M, Unilever, ParkwayLife REIT and CapitaLand Ascott Trust are constituents of the DKIP Portfolios.
