Saxo Spotlight: US CPI, China credit data, and focus on US Q2 bank earnings – July 10-14 Saxo Spotlight: US CPI, China credit data, and focus on US Q2 bank earnings – July 10-14 Saxo Spotlight: US CPI, China credit data, and focus on US Q2 bank earnings – July 10-14

Saxo Spotlight: US CPI, China credit data, and focus on US Q2 bank earnings – July 10-14

Macro 8 minutes to read
Redmond Wong

Chief China Strategist

Summary:  US CPI is expected to decelerate in June, with forecasts pointing to a slowdown in inflation to 3.1% YoY from 4.0% in May. Core CPI is also anticipated to fall to 5.0% YoY. China's loan growth is steady, with analysts expecting new aggregate financing to increase in June. The Reserve Bank of New Zealand and the Bank of Korea are likely to keep their policy rates unchanged. The US Q2 earnings season begins with a focus on banks, as investors monitor deposit costs and exposure to the commercial real estate sector. Stress tests show US banks are well-capitalized to withstand adverse scenarios.

US CPI expected to decelerate

The focus of this week is US CPI, which is expected to decelerate. The median forecasts in Bloomberg’s survey of economists point to a slowing of the CPI inflation in June to 3.1% Y/Y from 4.0% in May but a pick-up to 0.3% M/M from 0.1%. As prices of used vehicles, lodging, and airfares have softened in June, the median forecast for core CPI is a fall to 5.0% Y/Y and 0.3% M/M in June from 5.3% and 0.4% respectively in May. This data point probably will not change the Fed’s well-communicated intention to resume hiking at the July FOMC meeting. However, if the core CPI decelerates as anticipated, investors may continue to keep the odds for September and November rate hikes low.

China's June Loan Growth Steady, Aggregate Financing and Money Supply Slow

Due to seasonality, the median forecasts of analysts surveyed are anticipating new aggregate financing to reach RMB 3,100 billion in June, up from RMB 1,560 billion in May, and new RMB loans to be RMB 2,318 billion in June, compared to RMB 1,360 billion in May. These forecasts suggest that the growth of the outstanding stock of aggregate financing will slow to 8.1% Y/Y in June, down from 9.5% Y/Y in May. However, loan growth is expected to remain similar to the 11.3% Y/Y growth observed in May.

The growth in loans has likely been supported by window guidance from the People's Bank of China, which encouraged banks to extend credits in order to bolster the economy. On the other hand, the broader measure of aggregate financing has been negatively affected by slower government bond issuance.

In terms of M2 money supply growth, it is anticipated to decelerate to 11.2% Y/Y in June, compared to 11.5% Y/Y in May.

Reserve Bank of New Zealand and Bank of Korea set to hold rates unchanged

The Reserve Bank of New Zealand (RBNZ) is holding a policy meeting on Wednesday, and the Bank of Korea (BoK) is holding its policy meeting on Thursday. Market participants are expecting both central banks to stay put, leaving their policy rates unchanged.

Back in May when the RBNZ’s Monetary Policy Committee met and raised the policy rate by 25bps to 5.5%, the voting result was 5-2 with two dissenting votes in favor of a pause. The subsequent communication from the RBNZ indicated a terminal rate of 5.5%.

Given slower inflation in June and a deposit run at Maeul Geumgo, a community credit cooperative that recently triggered the Korean authorities to announce a full guarantee for deposits at the community lender, the BoK is expected to keep its policy rate unchanged at 3.5%.

US Q2 earnings season: key focus on banks

The US Q2 earnings season is set to kick off this week, with notable reports from JPMorgan, Citigroup, Wells Fargo, and State Street scheduled for this Friday. Investors will closely monitor the potential rise in deposit costs for banks, including the larger ones, as they compete with money market funds for deposit funding. Higher deposit costs could exert downward pressure on net interest margins and consequently impact profitability. Investors will also keep a close eye on these banks' exposure to the troubled commercial real estate sector.

It is also worthwhile to mention that the annual stress test conducted by the Federal Reserve on 23 large US banks has shown that all of them possess strong capitalization to withstand challenging economic and market conditions. This comprehensive evaluation assessed the banks' capacity to absorb losses and maintain lending operations under highly adverse scenarios, including a 10% increase in unemployment and a 38% decline in house prices.

During the stress test period, the aggregate common equity tier-1 (CET1) capital ratio for the 23 banks reached a minimum of 10.1%. However, it subsequently rebounded to 10.7% by Q1 2025, signifying the conclusion of the two-year testing period. Among the four banks announcing results this Friday, JPMorgan and State Street are projected to maintain their CET1 ratios comfortably above the aggregate level, with estimates of 11.1% and 13.8% respectively, even under severely adverse scenarios. On the other hand, Citigroup and Wells Fargo fall below the aggregate level of the 23 banks tested, with CET1 ratios of 9.1% and 8.2% respectively.

Earnings this week:

THU: Fastenal, Delta Air Lines, Progressive, PepsiCo, Cintas, Conagra Brands

FRI: Wells Fargo, JPMorgan Chase, BlackRock, UnitedHealth, State Street, Citigroup


Key economic events this week:

MON: China CPI (Jun), China PPI (Jun), US Manheim Used Vehicle Index (Jun)

TUE: Australia Consumer Confidence Index (Jul), Japan M2 (Jun), US NFIB Small Business Survey (Jun), Germany ZEW Survey (Jul), UK Payrolled Employees (Jun)

WED: US CPI (Jun), RBNZ meeting, US Fed Beige Book (Jul), Japan Machinery Orders (May), Japan PPI (Jun), Indian CPI (Jun)

THU: US PPI (Jun), China Exports & Imports (Jun), New Zealand Manufacturing PMI (Jun), Eurozone Industrial Production (May), UK Monthly GDP (May), UK Industrial Production (May), Bank of Korea meeting

FRI: US U of Michigan consumer sentiment (Jul), Japan Industrial Production (May), Singapore Real GDP (Q2)

During the week: China aggregate financing and loan data (Jun)



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