Investors brace for Fed rate cut impact as Santa's arrival nears
As the world eagerly anticipates Santa Claus' arrival in just one week, investors are already feeling the effects of a significant financial event: the recent rate cut decision by the Federal Reserve. This move is set to dominate headlines not only this week but also as we transition into early 2024, amid the post-holiday hangovers and renewed commitment to New Year diets.
In Australia, market watchers are turning their attention to the upcoming release of the minutes from the December meeting of the Reserve Bank board. Shane Oliver, Chief Economist at AMP, anticipates that these minutes "will likely reiterate the RBA's concerns about still-high services inflation, inflation expectations, and the tight labor market. They will also indicate that whether rates go up again will depend on global developments, jobs, consumer spending, and inflation data to be released before the February meeting."
Oliver further notes, "Our view is that lower December quarter inflation data and growing evidence of a softer economy will likely deter another rate hike, although the risk remains."
Looking beyond the immediate week, the financial calendar includes several key events. On December 29, attention will shift to credit growth data. On January 2, Core Logic house price data for December will be released, followed by November retail sales figures on January 9. January 11 is set to witness the release of the November Consumer Price Index (CPI) Inflation Indicator, which Dr. Oliver predicts will slow to an annual rate of 4.6%, down from 4.9%, as high year-ago increases drop. Additionally, November job vacancies data will also be unveiled on the same day.
The ANZ Bank is scheduled to hold its annual meeting on December 21, garnering interest from investors and stakeholders.
In the United States, this week's focus will be on various data releases, including housing starts and home builder confidence. On Wednesday, consumer confidence data will take center stage, along with the release of personal consumption expenditure data, including core Personal Consumption Expenditure (PCE) prices. The latter is closely monitored by the Federal Reserve and could impact the ongoing discussion around rate cuts. Investors will also keep an eye on the release of December and 2023 consumer price data on January 11 and producer price data shortly thereafter.
Turning to Europe, inflation and employment data are expected to be disclosed on January 5, providing insights into the region's economic health.
In Asia, all eyes are on Chinese trade data for December and 2023, with questions arising about whether imports will once again defy expectations. Additionally, inflation figures for December and the entire year of 2023 will be released on the same day, shedding light on price trends in the world's second-largest economy.
As we approach the holiday season, the financial world remains vigilant, closely monitoring these key events and their potential impacts on global markets and economies. Santa may be on his way, but for investors, the real gift may lie in the data and decisions that lie ahead.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.