Economic data, US earnings to guide market’s moves

A full week of economic data will set the tone for the local bourse, with another week of US earnings ­season adding flavour to market sentiment.

US earnings figures could give Australian investors a lead in market trading this week. Picture: Getty Images

A full week of economic data will set the tone for the local bourse, with December retail trading data and the latest CPI figures due, and another week of US earnings ­season adding flavour to market sentiment.

December retail data will be released on Tuesday, with AMP deputy chief economist Diana Mousina expecting the figures to show a softer-than-usual Christmas period, after shoppers flocked to early sales in November.

Ms Mousina said the CPI number should show that inflation is tracking below the Reserve Bank’s projections, and should provide relief – to the market, consumers and eventually homeowners – that inflation rates are firmly headed downwards.

“The December quarter consumer price data (on Wednesday) is expected to show headline consumer prices up by 0.7 per cent over the quarter, or 4.2 per cent year-on-year, and 0.9 per cent over the quarter,” she said in a client note.

“The monthly data should show annual inflation running at 3.3 per cent over the year to ­December.”

Other local data releases include December credit figures, January home prices, the NAB quarterly business survey, December building approvals and housing lending figures.

Close watchers of the resources sector will also be keeping an eye out for China’s manufacturing purchasing managers index (PMI) for any signs of economic recovery in the country – although that is also expected to show subdued levels of activity.

The US Federal Reserve also meets this week, but is widely expected to leave interest rates on hold.

Wall Street also offered a thin lead for local traders returning from Friday’s Australia Day market holiday, with the S&P 500 index closing down slightly on the week’s final day of trading to break a six-day streak of record high finishes.

The US earnings season could provide some leads on sentiment for the local bourse, with some of the biggest companies in the world – including tech giants Apple and Microsoft – to report.

Microsoft will release its results on Tuesday in the US, along with Google parent Alphabet. Online sales giant Amazon.com report on Thursday, along with Apple.

General Motors’ results could also give local resources investors a steer, with the automotive giant’s views on the shift to electric vehicles likely to be watched for those looking for clues on which way to jump amid the local lithium stock rout – particularly given the market’s savage response to the disappointing growth outlook offered by Tesla last week.

In the week ahead, 106 S&P 500 companies are scheduled to report, according to FactSet. So far, a quarter of the S&P 500 companies have reported this month, with fourth-quarter earnings on track to fall 1.4 per cent from the previous corresponding period.

The expected results come amid greater optimism that the US economy can avoid a recession as the Fed’s efforts appear to be tamping down inflation. Consumers have become more upbeat about the economy and helped it expand faster than expected in 2023.