Introduction:
Inflation data from the United States, the eurozone, and Japan will be the main focus in markets this week, along with the health of China's manufacturing sector and oil demand expectations.
Inflation Data:
- United States: The Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, will be released on Friday. Investors will be looking for signs of easing price pressures, which could reduce the pace of future interest rate hikes.
- Eurozone: Eurozone inflation is expected to rise to 2.5% in May on an annual basis, while core inflation is expected to remain steady at 2.7%. These figures could influence the European Central Bank's path of interest rate cuts.
- Japan: Tokyo inflation data will be released on Friday. Investors will be looking for signs that could prompt the Bank of Japan to raise interest rates at its upcoming meeting.
Manufacturing Health in China:
- China will release its year-to-date industrial profit data on Monday. Investors will be looking for signs of a rebound in profits after a sharp drop in the previous month.
- China will release its official manufacturing and non-manufacturing Purchasing Managers' Index (PMI) figures on Friday. Economists expect the manufacturing PMI to remain above the 50 threshold that separates growth from contraction for the third month in May.
Oil Prices:
- Oil prices rose about 1% on Friday but posted a weekly loss on concerns that strong U.S. economic data will keep interest rates higher for longer, dampening fuel demand.
- Oil demand remains strong from a broader perspective, with expectations for total oil consumption to increase by about 1.5 million barrels per day this year.
- Weak U.S. gasoline demand is being offset by a surprise surge in global demand, especially in the early part of the year.
Additional Notes:
- Several Federal Reserve officials will be speaking throughout the week, including Federal Reserve Governor Michelle Bowman, Cleveland Fed President Loretta Mester, Governor Lisa Cook, New York Fed President John Williams, and Atlanta Fed President Raphael Bostic.
- The eurozone will also release the German IFO business climate index on Monday, and the ECB's survey of inflation expectations on Tuesday.
- The Japanese Ministry of Finance will release intervention data covering the latest rounds of suspected intervention and the Bank of Japan's bond-buying schedule on Friday.
Conclusion:
The week ahead will be packed with key events that will impact financial markets. Investors will focus on inflation data from major global economies, the health of China's manufacturing sector, and oil demand expectations.
