eToro market analyst Josh Gilbert shares his three things to watch in Australia in the coming days.
1. US Inflation
As we approach the March 12 release of the US February CPI data, markets are on edge, anticipating another possible surge in inflation figures.
This data proceeds the much-awaited March 20 US Federal Reserve meeting and these numbers could set the tone for the Fed’s monetary policy decisions.
Inflation trends have been quite volatile, peaking mid-2022 before dipping, and now potentially on the rise again.
Should recent data be indicative, we may see annual rates hovering near – or surpassing – 3%, diverging from the Fed's 2% target.
The Fed has hinted at interest rate cuts in response to falling inflation, but the magnitude of these cuts will likely be influenced by the course inflation takes.
If estimates for February's CPI data hold, markets may be left questioning the need for significant rate reductions in 2024. Yet the Fed maintains a cautiously positive outlook, aiming to guide inflation back to the 2% target as it continues to keep a close eye on the services sector and housing costs trends, both essential factors in the broader inflation narrative.
2. NAB Business Confidence
NAB’s monthly business survey for February, which will be released on Tuesday, is set to indicate how ongoing price pressures and inflation continue to affect business confidence.
December and January’s data saw confidence increase from November’s 6-point fall to -9 index points, a promising sign for investors that this week’s data will reflect an ongoing rise in business confidence as inflation begins to ease, with rate cuts predicted to begin in June.
This is another key data point that the RBA will be watching ahead of its next rate decision. Rate cut expectations have been toned down since the start of the year, but markets still expect to see three cuts this year, meaning next week's data point is another crucial piece of the puzzle.
3. China Retail Sales
China's February retail sales data, set to release on March 18, will once again bring the nation's concerning consumer spending trends to the forefront of investors’ minds.
Declining property values continue to significantly impact consumer sentiment, despite the government’s efforts to stimulate the property market. This, coupled with the threat of pay cuts and job losses, has forced many consumers to favour saving over spending.
UBS projections suggest a potential drop in retail sales growth, with 2024 estimates indicating a rise of 5.5%, a notable reduction from the 6.5% growth experienced last year.
As consumers turn towards discounted goods in these uncertain economic times, policymakers must take more decisive actions and improve their policy stance to avoid worsening declining consumer confidence and hindering spending.