With the big corporate names already done reporting their latest quarterly results, there may be less volatility in the markets next week. However, market participants may closely monitor CPI data from the UK and the US.
Tuesday 14.02. 13:30 GMT, US Consumer Price Index (CPI) YoY January
The Consumer Price Index (CPI) measures the change in prices consumers pay for a particular basket of goods and services over a certain period. This information will show changes in comparison to one year ago. CPI is a key indicator for inflation - a higher index indicates higher inflation.
US inflation has fallen over the past six months, reaching 6.5% in December, its lowest level since October 2021. January CPI is forecast to fall further to 6.2%.
According to the US Energy Information Administration, nominal residential electricity prices may increase by 2.5% on average in 2023, down from 10.3% in 2022. Cost-of-living pressures may be eased by the fall in energy prices, especially petrol, although this may not spread to other sectors as much as hoped.
Falling CPI may also result from the Federal Reserve's policy of raising interest rates. If the CPI continues to show a decline in inflation, markets may take this as confirmation that the Fed may soon stop raising interest rates.
Higher-than-expected data could be bullish for the US dollar and bearish for the stock market. Conversely, weaker-than-expected data could be bearish for the US dollar and bullish for equities.
Impact: USD, S&P 500, and other indexes
Wednesday 15.02. 07:00 GMT, UK Consumer Price Index (CPI) YoY January
While the UK Inflation has returned to mid one-digit numbers and is expected to continue the downward trend, the UK CPI has only slightly bounced off its highest number in decades (11.1% in October 2022) and is now expected to show the same level as the month before (10.5%).
An inflation rate above 10% could justify the BOE's decision to raise interest rates by 50bp last week and continue its hawkish policy in the near future.
Higher-than-expected data may have a bullish impact on the British pound and a bearish effect on the stock market. In contrast, lower-than-expected data may have a bearish impact on the British pound and a bullish impact on the stock market.
Impact: GBP, FTSE 100, and other indexes
Thursday 16.02. 13:30 GMT, US Building Permits January
Building permits show the change in the number of building permits issued by the US government. As the key indicator of the demand in the housing market, building permits may provide valuable insight not only into the household sentiment regarding their economic future and, therefore, their demand in the real estate market but also into the performance of the construction industry in the near future.
Building permit data show that demand for new homes has been declining since March 2022, reaching 1.377 million in December - the lowest level since May 2020 - as rising mortgage rates and high inflation seems to discourage households from incurring additional expenses related to new homes. Such a scenario is in line with the Fed's tightening policy to slow down economic activity in the country.
The number of building permits in January is forecasted to decrease to 1.370 million. Higher-than-expected data may have a bullish impact on the US dollar, while lower-than-expected data may have a bearish impact on the US dollar.
Impact: USD
Stocks to watch
Coca-Cola (KO) announcing its earnings results for the quarter ending on 12/2022. Forecast: 0.4462. Positive earnings surprise in 10 out of the last 10 reports. Time: Tuesday, February 14, before the market opens.
Airbnb (ABNB) announcing its earnings results for the quarter ending on 12/2022. Forecast: 0.2526. Positive earnings surprise in 6 out of the last 8 reports. Time: Tuesday, February 14, after the market closes.
Cisco (CSCO) announcing its earnings results for the quarter ending on 01/2023. Forecast: 0.8562. Positive earnings surprise in 10 out of the last 10 reports. Time: Wednesday, February 15, after the market closes.
Airbus Group NV (EADSY) announcing its earnings results for the quarter ending on 12/2022. Forecast: 0.4677. Positive earnings surprise in 4 out of the last 7 reports. Time: Thursday, February 16, 06:30 GMT.
Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement, or investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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