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Inflation concerns amidst Nvidia's surge

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2024-02-26

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Inflation rears its ugly head this week, just as investors, large and small, were wondering if their latest dose of AI FOMO (Fear of Missing out) over chip surge, Nvidia, had gotten a little overheated.

Nvidia shares are up more than 60% year to date - that’s a gain of close to 9% a week - but last week that slowed to 6.50% even though it reported gangbuster revenue and earnings - and by Friday all it could manage was a gain of 0.36%.

So perhaps investors will be paying more attention to the string of data reports - led by US personal consumption expenditure figures (the Fed’s favorite) and inflation reports from Europe, Japan, and even Australia.

The Reserve Bank of NZ is the lone major central bank making a rate decision this week, so there will be more than usual attention on it and whether it decides to lift its official cash rate from the present high of 5.5%.

In Australia, the monthly CPI indicator for January will be issued and even though it is forecast to again slow month on month, statistically it could show a small rise as the comparison base from last year changes. That will be on Wednesday.

AMP Chief Economist, Shane Oliver, says he expects the monthly measure to fall to 0.2% month on month but the annual rate to ease up to 3.5% from 3.4% because of the base effect from this time last year.

He says that “abstracting from the monthly volatility this should confirm the ongoing downtrend in inflation and progress towards rate cuts but on its own probably won’t be enough for the RBA to drop its mild tightening bias at its March meeting.”

(And the ABS is looking at turning the monthly partial CPI - it covers around 70% of the quarterly report - into a full monthly version of the larger series)

The first estimate of January retail sales will be out on Thursday and Dr. Oliver says they should show a rise of 2% after the big fall in December and the smaller rise in November after revision.

The February house price figures on Friday from CoreLogic are likely to show a 0.6% rise from January’s 0.4% increase.

And the run-up to the release of the December quarter National Accounts (on March 6) starts with figures on construction work done in the three months on Wednesday and private capex spending figures on Thursday.

This week is also the final in the December half and full-year profit reporting season.

In the US, the so-called PCE (Personal Consumption Expenditure) figures on consumer income, spending, and especially prices will be out on Thursday.

Dr. Oliver says a rise of 0.4% month on month is forecast but a fall to an annual rate of 2.8% from 2.9% in January.

As well, data on US durable goods orders, consumer confidence, home prices (Tuesday), and the start of the month survey of business activity will be released and are expected to be solid to weak (for the business activity survey results especially).

The second estimate of 4th quarter GDP is forecast to be steady at 3.3% from the first estimate a month ago.

And the US 4th quarter earnings season is nearly over.

Eurozone inflation data for February is likely to show a slight fall from an annual 2.8% in January (2.7%) with unemployment unchanged at 6.4% (both out Friday). Friday saw Germany’s 4th quarter contraction confirmed at 0.3%.

Tomorrow sees Japan’s latest inflation figures for January which Dr. Oliver says "is likely to show a sharp fall to around 1.9% yoy with core inflation falling to around 2.4% yoy."

Chinese business conditions PMIs for February (Friday) are likely to have remained subdued at or near contraction readings around 50.

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