Trader’s Diary: Everything you need to get ready for the week ahead

US inflation rose to the highest level in 40 years
Australia’s RBA surprisingly raised rates by 50bps last week
The US Fed is set to hikes rates on Wednesday (US time)

US inflation at highest in 40 years

Friday’s release showed that US consumer prices grew by 8.6% in May from a year ago, beating the 8.3% forecast and taking the CPI level to its highest since 1981.

Excluding the volatile food and energy prices, the so-called core CPI was up 6%, still higher than the 5.9% consensus forecast.

The data rocked US stock markets, with Nasdaq plunging by 3.5%, and the S&P 500 and Dow having their worst week since January.

Worse still, most experts believe that inflation is not ready to peak, given the ongoing geopolitical tensions.

“The Fed’s latest mistake is that they did not act strongly to cool inflation, and they will now be forced to deliver more rate hikes as inflation is clearly not transitory and not ready to peak,” said Oanda market analyst Edward Moya.

“Stagflation is becoming the base case for many traders. Consumer financial situations worsened about 20%, and that does not bode well for consumer spending,” he added.

Scorching inflation has spread around the world, with the average global inflation rate soaring to 7.4%.

In the UK and Germany, inflation has risen to the highest rate in 40 years, while in Latin America’s largest economies, it’s at the highest in 15 years.

world inflation

A stagflation in Australia?

At 5.1%, Australia’s inflation is lower than most OECD countries, and is the sixth lowest out of the 38 OECD economies.

But economists have warned the worst is yet to come, with some saying that Australia may be heading towards a stagflation. A stagflation happens when the economy is stagnant even as inflation is rising.

With rates now 50bp higher than a week ago and energy and food prices continuing to rise, the stagflation scenario could well play out.

But Uni of Sydney Associate Professor David Kim said: “Unemployment would need to rise to 6-10% for stagflation to occur, and the central bank would essentially have to “do nothing” when they saw unemployment starting to increase.”

Economic calendar for this week

This week’s economic calendar will be headlined by the US Fed interest rates decision on Wednesday (US time), and Eurozone CPI data on Friday (EU time).

Australia

TUESDAY
CBA Household Spending Indicator for May
NAB business survey for May
Monthly household spending indicator for Apr

WEDNESDAY
Overseas arrivals and departures for Apr
Weekly consumer confidence index
Monthly consumer confidence index for Jun

THURSDAY
Labour force (May) Reserve Bank Bulletin

Global

MONDAY
US Consumer inflation expectations for May

TUESDAY
US Producer Price index for May
EU Industrial Production for YoY Apr

WEDNESDAY
US Federal Reserve interest rate decision US Retail sales for May
US Import and export prices for May
EU Trade Balance for Apr

THURSDAY
China New home prices for May
EU Wages in euro zone for YoY Q1

FRIDAY
US Industrial production for May
Euro core CPI

Source: Commsec

ASX IPO calendar for this week

Kingsland Minerals (ASX:KNG)

Listing: June14

IPO: $5.5m at $0.20

This company has four projects across the NT, including the Allamber uranium and copper project, the Shoobridge uranium and gold project, the Woolgni gold project and the Mt Davis copper and gold project.

Kingsland also holds the Lake Johnston nickel and cobalt project in WA, 36km from the Emily Ann and Maggie Hays nickel deposits and Lake Johnston concentrator owned by Poseidon Nickel (ASX:POS).