The market will be hoping for signs that inflation in the US will continue to ease. It has already fallen from a one-year high of 4.8% to 3.4% last month. Another crop of good CPI numbers on Thursday could embolden the market to expect a cut in the Fed fund before the end of this year.
India and China will also report inflation numbers. The inflation rate in India fell to its lowest in one year. The market thinks that conditions are probably appropriate for the Reserve Bank of India to deliver more than one rate cut this year. Meanwhile, China’s inflation rate remains low but, reassuringly, it has been positive for four consecutive months. Another positive inflation number could suggest that consumer demand is recovering.
Malaysia will step forward with a slew of economic numbers. The May unemployment rate is expected to be unchanged at 3.3%, and retail sales growth could have dipped from 5.5% in April to 5.0%. Elsewhere, Bank Negara Malaysia is expected to keep its overnight policy rate (OPR) unchanged at 3.0%. The central bank will most likely wait for the US Fed to move first on interest rates before it cuts the OPR.
On the corporate front
Three of America’s biggest banks will report second-quarter numbers. All three banks, namely, Wells Fargo & Co (NYSE: WFC), JP Morgan Chase (NYSE: JPM) and Citigroup (NYSE: C) are expected to post strong earnings and revenues. Of interest to investors will be the banks’ exposure to office-property loans. Thankfully, they are big enough and diversified enough to wait out the downturn in the property sector.
Manchester United (NYSE: MANU) is pencilled in for third-quarter numbers on Wednesday. In March, the football club reported record quarterly revenue of £226 million. The robust second-quarter performance was driven by strong matchday and broadcast revenue. Pleasingly for football fans, ManU has booked a place in European football next season after it qualified for the Europa League when it beat Manchester City in the FA Cup final.
In April, WD-04 (Nasdaq: WDFC) delivered second-quarter numbers that were in line with market estimates. However, it provided a somewhat muted guidance for the full year. The company said it was pursuing a sale of its American and UK Homecare and Cleaning Products portfolio to focus on its core higher-margin maintenance products, whilst creating headspace for future innovation.
Fast Retailing (NYSE: FRCOY) is set to report third-quarter earnings. In April, the owner of Uniqlo posted a 7% jump in second-quarter profit but maintained its annual profit guidance. Key to Fast Retailing performance will be its largest foreign market, namely, China. With 922 stores in the Middle Kingdom, the company is seen as a barometer of the Chinese consumer.
In April, soft-drinks titan, PepsiCo (Nasdaq: PEP), reported a 6% rise in first-quarter earnings on revenue that rose 2.3%. However, the company warned that American households are still trying to stretch their pay cheques, which resulted a volume decease at its food division. But outside of the US, demand in countries that include Asia-Pacific and China was stronger.
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Disclosure: Fast Retailing and PepsiCo are constituents of the DKIP Asian Consumer Portfolio.
