This week, investors will focus on inflation data from major economies, including the US, EU, and UK, while China’s fourth-quarter GDP figures will also be closely scrutinized for insight into the country’s economic trajectory.
European Markets and Inflation Data
European stock markets outperformed their global counterparts last week, buoyed by expectations of a more accommodative monetary policy from the European Central Bank (ECB), in contrast to the Federal Reserve. However, a strong US jobs report on Friday led to a surge in US and European government bond yields, triggering a broad-based selloff in equities.
Eurostat is expected to release final inflation data for December, with preliminary estimates indicating a rise in the eurozone’s headline consumer price index (CPI) to 2.4% year-on-year, up from 2.2% in November and 2% in October. While this increase is largely due to base effects, as falling energy prices no longer impact the annual rate, core inflation remained steady at 2.7%. The figures support expectations of further rate cuts from the ECB in January, with a total reduction of one percentage point expected this year. The ECB is forecasting inflation to return to its 2% target by the end of 2025.
In Germany, the final CPI figures for December are also set to be confirmed. Flash data revealed a rise in inflation to 2.6%, up from 2.2% in November. Core CPI increased to 3.1%, indicating persistent price pressures. In the UK, inflation has climbed to 2.6%, with expectations for December to maintain the same level. This inflationary pressure may slow the Bank of England’s pace of rate cuts. Concerns over stagflation, along with a weakening pound and a recent selloff in UK government bonds, suggest that inflationary challenges will persist.
US Inflation and Economic Data
In the US, the CPI data for December will be a key economic indicator for global markets. Annual headline inflation is expected to rise to 2.9%, up from 2.7% in November, while core inflation is projected to hold steady at 3.3%. This persistent inflation trend could lead to a more gradual pace of Federal Reserve rate cuts, especially after the robust job report released on Friday. Additionally, the Producer Price Index (PPI) will be released, with December’s PPI expected to show a 3% year-on-year increase, mirroring November’s rise.
Retail sales data will also be in focus, with a forecasted growth of 0.6% month-on-month during the holiday season, following a solid 0.7% increase in November.
China’s Economic Growth
In Asia, China’s fourth-quarter GDP figures will be released, with analysts expecting a 5% year-on-year growth in the final quarter of 2024, up from 4.6% in the previous quarter. Full-year economic growth is expected to meet the government’s 5% target. Alongside GDP, key indicators such as industrial production, retail sales, and home prices are expected to show continued improvement, bolstered by Beijing’s stimulus measures.
These critical data releases from major global economies are set to influence market sentiment in the coming weeks, shaping central bank policies, currency movements, and commodity prices.
