Economic Pulse Check: Key Data Highlights and Market Outlook

Market overview: analyst’s view

Inflation:

Investors will be closely watching inflation data in the US, eurozone and Japan this week to get an idea of the central banks’ next moves.

The US PCE Personal Consumption Price Index (inflation) is expected to show an increase, which could prompt the Fed to tighten monetary policy further.

In the eurozone, inflation is likely to remain stable, but the ECB may start cutting rates in June. In Japan, inflation could push the BOJ to raise rates for a second time this year.

Manufacturing sector: China

The state of China’s manufacturing sector will be a key factor in assessing the country’s economic growth rate. Industrial profits data and PMIs are expected to show a recovery from April’s slump. However, a slowdown in growth in the first three months of the year could have a negative impact on Beijing’s ambitious targets.

Oil:

Concerns over slowing economic growth and lower fuel demand could continue to weigh on oil prices. Despite a pickup in demand at the start of the year, strong economic data in the US could keep interest rates high, negatively impacting oil consumption.

Conclusions:

Inflation will be a key factor influencing market movement this week. Inflation data should be watched closely to gauge the outlook for interest rates.
The state of China’s manufacturing sector will give an indication of the growth rate of the country’s economy. Investments in China’s domestic market-oriented stocks may be risky due to the slowing economy.
Oil prices may remain under pressure due to concerns about slowing economic growth. Oil traders are monitoring signals indicating changes in fuel demand.

Stock market valuation

Stock markets continue to rise despite global issues such as the war in Ukraine, tensions between the US and China, and the conflict in Gaza.

However, this optimism may be unfounded as there are several factors that could negatively impact the long-term outlook for stocks.

The economic cold war between the U.S. and China could be an obstacle to future growth.

Higher taxes to fund defense, could also negatively impact the stock market.

An increase in interest rates will increase stock position taking, and this could create a market crash.

In addition, stock valuations are already very high, making them vulnerable to a correction.

All indications are that downside risks to stocks exceed their upside potential.

Economic Calendar Events:

Monday

Britain – day off
USA – day off / Memorial Day

Tuesday

Consumer Confidence Index – USA

Wednesday

Consumer Price Index Germany

Thursday

Number of initial claims for unemployment benefits in the U.S.
US GDP 1Q
US Crude Oil Inventories

Friday

Index of business activity in the manufacturing sector – China
Consumer Price Index – European Union

Key volume support and resistance levels

Volume analysis of futures contracts such as: Euro, Pound, Oil, S&P500 index.

On all charts volume support levels are marked in green color, and resistance levels are marked in red color. Each volume analysis level is indicated by two prices, as the levels are price ranges.