(Reuters) -Tariff curve balls lobbed at economies and markets around the world by U.S. President Donald Trump will punctuate a week of inflation data from the U.S. and Britain as well as growth and retail sales numbers from China.
Meanwhile, earnings season is getting under way on both sides of the Atlantic and G20 finance officials are preparing to meet in South Africa.
Here’s a look at the week ahead from Colleen Goko in Johannesburg, Kevin Buckland in Singapore, Lewis Krauskopf in New York and Lucy Raitano and Amanda Cooper in London.
1/TARIFF TEST FOR U.S. INC
A crucial U.S. inflation reading will offer Wall Street clues on when the Federal Reserve may next cut interest rates, as second-quarter earnings roll in.
June’s consumer price index, due Tuesday, is expected to show a monthly rise of 0.3%, according to a Reuters poll.
Recent minutes from the Fed’s June meeting showed only “a couple” of officials said they felt interest rates could be reduced as soon as this month, with most remaining worried about inflationary pressure they expect from Trump’s tariffs. Fed fund futures indicate a slim chance of a rate cut at the end-July meeting, but suggest easing in September is likely.
The impact from Trump’s trade tantrums will share the stage with corporate reports – the first earnings quarter under these tariff wars. Major banks also report in the coming week, including JPMorgan Chase, Bank of America and Wells Fargo while results are due from Netflix, Johnson & Johnson and 3M.
2/AND IN EUROPE
Second-quarter earnings also kick off in Europe, and paint a glum picture.
In the U.S., it is already not looking pretty: earnings are expected to post their weakest growth in two years. Corporate profits at S&P 500 companies are seen increasing 5.8% year-on-year, according to LSEG I/B/E/S – a marked slowdown from the first quarter’s near-14% rate.
In Europe, STOXX 600 earnings are expected to fall 0.2% after last quarter’s 2.2% growth. Forward guidance will be key to understanding the fallout from this era of tariffs and fears of more levies.
It’s not obvious in the market’s performance though, where the S&P 500 is scaling new record highs, while bourses in Europe including Frankfurt and London are hovering near previous peaks, shrugging off high uncertainty and moderating earnings growth rates.
3/STIMULATING SPENDING
Trump’s rekindled fragile bromance with Chinese leader Xi Jinping must have come as a great relief to Beijing policymakers, allowing them to focus on tackling deep-rooted economic problems at home.
GDP figures due on Tuesday are tipped to show the economy still chugging along above the government’s soft target of 5%-ish growth. But same-day retail sales numbers should reinforce that consumers are still saving instead of spending, frustrating government efforts to gear the economy towards consumption.
On Wednesday, Beijing unveiled new measures to stabilise employment, including more social insurance subsidies, special loans and targeted support for young job seekers.
With the politburo due to meet around the end of the month, hopes are high – as evidenced by soaring stocks – for more stimulus to come. Any data weakness is only likely to fan that speculation.
4/ A STICKY SITUATION
At 3.4%, Britain has the highest inflation among the G7 – and CPI numbers due on Wednesday will spell out just how sticky price pressures are.
A deal on U.S. tariffs that was less grim than feared, and a stronger pound, may help the UK to absorb any inflationary impact. In terms of the British consumer, regular pay growth has run above 5% for the better part of five years. So far, so good.
But the tax burden is the highest since the 1940s and growth in real wages – adjusted for inflation – is slowing, having risen just 1.5%, their lowest rate in almost two years.
Friday’s data showed the economy shrank for a second straight month in May – not great news for finance minister Rachel Reeves, who delivers her annual Mansion House speech along with Bank of England governor Andrew Bailey on July 15, or for UK households and businesses.
5/A TEST OF RELEVANCE
G20 finance ministers and central bankers gather in Durban from Thursday under South Africa’s presidency amid growing questions over the group’s effectiveness on stalled progress on debt relief, climate finance and access to capital for developing nations.
South Africa’s priority areas have seen glacial progress. The Cost of Capital Commission lacks formal support and the Just Energy Transition Partnership – a collaboration between richer nations to help developing countries transition to cleaner energy – is limping along.
U.S. Treasury Secretary Scott Bessent will skip the meeting altogether – the second time he has opted out of a South Africa G20 event – to attend Japan’s World Expo 2025 instead.
The BRICS group of developing nations, along with other alternative forums, is trying to fill some of the void, though the U.S. has criticised its initiatives involving local currency payments as being “anti-American.”
(Graphics by Vineet Sachdev, compiled by Karin Strohecker, editing by Andrew Heavens)
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