Week ahead: Can US inflation redirect global markets?

US inflation this year has been stickier than thought when the Fed first set out its cutting plans in December. We’ve had three hotter-than-expected CPI readings and a quarterly PCE report that showed prices rising more than central bankers had anticipated.

The data has seen traders trim bets for rate cuts this year. Now the next CPI inflation report is due it could spark a fresh move in risk assets. Meanwhile, earnings season winds down on Wall Street and there are some other inflation reports from the Eurozone and China to consider.

Here are the week’s key events:

Monday, May 13th: China Inflation Data

The market opens for the week with Saturday’s Chinese inflation data likely to be the main driver for trading in Asia. China has been grappling with deflation that has betrayed a somewhat soft domestic demand picture. CPI inflation edged higher in March but at just +0.1% year-on-year missed expectations, whilst producer prices declined by 2.8%.

Later on, we get the New Zealand inflation expectations reading and German wholesale prices.

Tuesday, May 14th: Japan PPI Inflation, UK Unemployment Report

Eyes on some data out of Japan's early doors with PPI inflation and preliminary machine tool orders; albeit the moves in the yen right now seem to be about much bigger macro and monetary policy forces.

Sterling might face some volatility around the latest unemployment report and Bank of England chief economist Huw Pill is scheduled to speak. Later, we get the latest PPI inflation data from the US in anticipation of consumer data tomorrow. Fed Chair Jay Powell is also due to speak.

Earnings: Alibaba Group (BABA), The Home Depot (HD)

Wednesday, May 15th: US Inflation Print

Key inflation data is the focus. US inflation, as measured by the Consumer Price Index (CPI), rose to 3.5% in the year to March, the third hot reading in a row, forcing traders to slash bets on Federal Reserve interest rate cuts. Core US inflation also rose more than expected, rising to 2.8% year-on-year. The data for April will be crucial to how markets see the Fed progressing.

Despite the resilience of US inflation, the message from the Fed remains one of easing to come – cuts are in the mail. Retail sales data from the US and the Empire State manufacturing index are also due.

Also, watch the latest wage growth figures from Australia for a clue about whether the Reserve Bank of Australia really is going to consider another hike before it starts cutting.

Earnings: Cisco Systems (CSCO), The Trade Desk (TTD)

Thursday, May 16th: Japan GDP, Australia Employment Figures

Preliminary GDP data for Japan and employment figures from Australia set the scene for the Asian session. Central bank speakers are plentiful, with the BoE’s Greene and FOMC’s Mester and Bostic scheduled to deliver speeches.

US unemployment claims, industrial production and the Philly Fed manufacturing index are due up later. Walmart is due to report earnings.

Earnings: Baidu (BIDU), Deere & Co (DE), JD.com (JD), Walmart (WMT), Applied Materials (AMAT)

Friday, May 17th: China Industrial Production, Retail Sales

A focus on China to end the week – the latest monthly round of industrial production and retail sales data is due up ahead of Saturday’s interest rate decisions.

Final CPI inflation data for the Eurozone is expected to show disinflation easing, but it’s unlikely to be anything significant enough to prevent the European Central Bank from cutting rates in June.

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