Macroeconomic data releases are likely to take centre stage on Wednesday, starting with Chinese trade figures and then UK economic growth, before US inflation hogs the limelight later - while in London's company diary are a pub company, a cafe chain and a recruiter.
The US consumer price index, which comes a day ahead of factory-gate inflation numbers, will ramp up speculation about the next move the Federal Reserve will make on interest rates.
“The market is favouring a 75bp rate hike from the Federal Reserve on 27 July and we agree given the tight jobs market and inflation running at more than four times the 2% targeted rate,” said economists at ING.
“In fact, inflation is likely to move even further above target this coming week as gasoline, food, shelter and airline fares continue to rise apace. Core inflation may slow marginally to 5.8% from 6%, but this too is well above target.”
As the market expects higher inflation, this leads to rate expectations growing, which leads to bond yields around the world coming down, with the US yield curve inverting again - setting off another flashing light on the global recession dashboard.
CPI inflation was 8.6% in May, the highest figure since the 8.9% seen in December 1981, and is forecast to climb to 8.8% for June.
US producer price inflation, which will be confirmed on Thursday, was at 10.8%, only a fraction below March’s 21-year high of 11.5%.
Market analyst Fawad Razaqzada at City Index said: “If expectations are met or beaten, then this should keep the dollar on the front-foot especially against currencies where the central bank is still relatively more dovish.
“The EUR/USD could break parity and the USD/JPY could climb towards 140."
He added that it is while inflation data may soften in coming months, “June might come too soon for the impact of slightly lower agricultural prices to have been passed through onto the consumer. So, just like May, there is a risk that inflation could overshoot again. If so, this will likely trigger fresh gains for the dollar."
UK growth and Wetherspoons
As for the old country, the Office for National Statistics is expected to confirm expectations that the UK economy continued to shrink in May, following a 0.3% drop in April - although that was mainly said to be driven by the end of the NHS test-and-trace program.
“As we look to the May numbers the outlook isn’t likely to improve significantly even if we see a modest improvement,” said analysts at CMC Markets.
“Fuel prices are set to go even higher with daily reports of record highs for diesel as well as petrol, as it becomes more and more expensive to fill up. At some point this will lead to demand destruction as consumers prioritise spending.”
Ahead of its half-year results on Wednesday, JD Wetherspoon PLC (LSE:JDW) was branded as one of broker Liberum’s least favoured stocks.
Analysts expect Spoons to reveal “weak post-Covid sales momentum, high labour intensity and narrow margins”, which makes it vulnerable to the double pinch of inflation. (Read more here)
With so many companies, most obviously airlines, struggling without enough staff, a half-year update from recruiter PageGroup PLC (LSE:PAGE) may prove interesting, with sector peer Hays the day after.
Back in April it reported a record end to its first quarter, with a record month as gross profit exceeded £100mln for the first time and up 43% for the quarter.
It saw a strong broad-based performance across all its geographies, disciplines and brands, with the 36% gross profit growth at constant currencies in the Asia Pacific the weakest and the 57% in the Americas the strongest.
Elsewhere, there will be final results from Loungers, the operator of Cosy Club cafe-bars, are expected to be strong, according to broker Peel Hunt, with record profitability and almost all its net debt paid off.
Like-for-like sales should have slowed due to the VAT rate rising and food cost inflation continuing to rise.
However, the broker expects rising scale and recent price increases to support consensus forecasts for £235mln sales and £20.2mln adjusted profits.
Wednesday 13 July
Finals: Ilika PLC, Loungers PLC, Renold PLC
Interims: GetBusy PLC, JD Wetherspoon PLC (LSE:JDW), Tullow Oil PLC
Trading updates: PageGroup PLC (LSE:PAGE)
AGMs: Asiamet Resources Ltd, Braveheart Investment Group PLC (AIM:BRH), Esken Limited, LondonMetric PLC Property PLC, MyCelx Technologies, Steppe Cement (AIM:STCM)
Economic announcements: Balance of Trade (UK), Gross Domestic Product (UK), Index of Services (UK), Industrial Productions (UK), Manufacturing Production (UK), MBA Mortgage Applications (US), Consumer Price Index (US), Crude Oil Inventories (US),