The Week Ahead: U.S. CPI And PPI Set To Soften | Daily Market Analysis

Key events:

Spain - Spanish CPI (YoY) (Aug)

UK - BoE Gov Bailey Speaks

Germany - German ZEW Economic Sentiment (Sep)

USA - Core CPI (MoM) (Aug)

USA - Federal Budget Balance (Aug)

Stock indices started September on a strong note, with the S&P 500 Index up 3.4% in the first week of the month and the NASDAQ Composite jumping 4.1%, while the Dow Jones Industrial Average was up just 2.4%. Whether this was just a market positioning adjustment or a sign of something more steady, we will find out this week, especially after a new set of inflation reports is released. Corporate news is less eventful, although there are several big conferences ahead. The past weekend served as a reminder of the ongoing and changing nature of the conflict in Ukraine, and while recent events may not have a direct impact on the market, their implications could certainly affect the financial world.

Be that as it may, they cannot help but affect the financial world.

Here is what you need to pay attention to:

1. CPI and PPI reports

This week there will be many Consumer Price Index (CPI) reports for August. Germany, Spain, and US will release their CPI report on Tuesday, France on Thursday, and Italy and the Eurozone on Friday.

The chart above shows the previous U.S. Core Consumer Price Index data

Producer Price Index (PPI) reports will also come out from Japan and Switzerland on Tuesday, and the UK and the U.S. on Wednesday.

U.S. inflation is expected to weaken: the monthly core CPI is expected to reach 0.3%, the same as last month's reading; this will be the lowest reading since last fall. The overall CPI is expected to be -0.1% as lower gas prices continue to weigh on inflation. The core producer price index (PPI) is expected to be 0.3%, up from 0.2% last month, while the overall PPI is expected to reach -0.1%.

In Europe, expectations are quite different; in the United Kingdom, core CPI is projected to rise 0.8% month-over-month, a significant jump, while overall CPI is expected to rise another 0.6%. In the eurozone, the core CPI is forecast to rise 0.5%, up from last month's revised 0.1%. The same is expected for the overall CPI, as energy prices are still high due to the changing seasons.

XAU/USD chart showing the recent drop as US CPI data looms

The ECB took the latest step by raising interest rates by 75 basis points last week. The Fed is expected to stick with an increase of at least 50 basis points, if not 75, and inflation reports should not sway it, but no doubt Fed Chief Jerome Powell will welcome signs that inflation is at least slowing significantly.

The Bank of England, which was supposed to meet last week but was postponed due to the death of Queen Elizabeth II, faces a more volatile environment as new Prime Minister Liz Truss, who has already released a major energy plan, is now at the helm. His impact on the market is one of the things the Bank of England will have to weigh in on; an employment report will also come out as additional data.

2. Big investment conferences

With summer and earnings reporting season over, this is the quietest time for many companies to meet with investors. Investor conferences and presentations often include strategic updates and announcements, changes in sellers' analytical and market thinking, and even deal-making.

A few notable conferences and analyst days this week:

Goldman Sachs (NYSE: GS) Communicopia + Technology Conference, which will include MongoDB (NASDAQ: MDB), Warner Bros Discovery (NASDAQ: WBD), Dynatrace (NYSE: DT), Dell Technologies Inc (NYSE: DELL), Airbnb Inc (NASDAQ: ABNB), Snowflake Inc (NYSE: SNOW), ServiceNow (NYSE: NOW), T-Mobile US Inc (NASDAQ: TMUS), Pinterest (NYSE: PINS) and Visa (NYSE: V)

Morgan Stanley's (NYSE: MS) 20th Annual Global Healthcare Conference, featuring companies such as Moderna (NASDAQ: MRNA), Pfizer (NYSE: PFE), Quidel (NASDAQ: QDEL), Merck & Company Inc (NYSE: MRK), Bausch + Lomb Corp (NYSE: BLCO), AbbVie Inc (NYSE: ABBV), Eli Lilly (NYSE: LLY), Insulet (NASDAQ: PODD) and Quest Diagnostics (NYSE: DGX).

3. Developments in Ukraine and their implications

Russia is trying to increase economic pressure on Europe by closing the Nord Stream 1 pipeline. Russia has begun to use its economic leverage against Ukraine and its supporters in predictable and unpredictable ways, which could put more pressure on European countries to resolve the energy situation before winter arrives, and which makes the inflation reports mentioned at the beginning of this article even more relevant.