The Week Ahead: Global PMI data, Micron earnings, US PCE

This week brings the latest international comparison of rich nations’ services and manufacturing sectors, with the purchasing managers’ index (PMI) surveys on Tuesday. The global economy has become increasingly difficult to assess. Shifting data points are creating apparent contradictions, particularly in the US where stock markets are running at record highs despite weak jobs data and rising inflation. Traders and investors will be eager to see how September is shaping up in the hope of finding some clarity. Meanwhile, Micron will report quarterly results, also on Tuesday, offering the latest snapshot of the artificial intelligence industry. The market will be keen to hear how the AI growth story is developing and whether there are any signs of a slowdown.

Eurozone, UK and US September PMIs

Tuesday 23 September

Generally speaking, PMI readings have improved across the US, the UK and Europe since the northern hemisphere’s spring, supporting the view that the challenges seen at the start of the year have eased. That trend seems likely to continue. Barring any major surprises, the PMI data’s impact on currency markets may be muted. While the euro has shown signs of breaking out against the US dollar, it could come under pressure if it fails to clear resistance near $1.19.

If EUR/USD can break through $1.19, it has a relatively clear path higher, with little resistance until around $1.226. However, if the attempted breakout fails and the pair cannot move above $1.19, the euro might weaken against the dollar, potentially slipping back towards support at $1.16.

EUR/USD, May 2021 - present

^{Sources: TradingView, Michael Kramer}

Micron Technology Q4 earnings

Tuesday 23 September

The Nasdaq-listed memory chip manufacturer is set to report that revenue grew 44.8% to $11.2bn in the fiscal fourth quarter, according to analyst estimates. Earnings are expected to have more than doubled to $2.86 a share, up from $1.18 a year ago. Meanwhile, the company’s gross margin is expected to have expanded to 43.4%, up from 36.5% a year earlier. As ever, guidance will be key, with analysts looking for revenue to increase 36.9% to $11.9bn in Q1 as margins edge up to 45.2%, resulting in earnings of $3.03 a share. The Micron share price, up more than 90% this year at about $169, could rise or fall around 9.2% following the Q4 results, based on options market positioning.

Implied volatility is likely to be well over 100% for at-the-money options expiring on 26 September. Positioning appears to be very bullish and, given Micron stock’s strong run since late August (it’s up about 40% in three weeks), the shares unsurprisingly find themselves overbought heading into Tuesday’s results, with the relative strength index (RSI) above 86 and the share price trading at its upper Bollinger Band.

Further upside is possible, but with volatility levels so high and the stock technically overbought, it is also possible that once the results are released and implied volatility falls, call option premiums could decay quickly, sending the shares lower. In fact, a decline back to the 20-day moving average at $133 does not seem implausible. Ultimately, the post-results price action may depend on whether the company surprises investors in a manner similar to Broadcom or Oracle – no easy feat.

Micron Technology share price, April 2024 - present

^{Sources: TradingView, Michael Kramer}

US August PCE price index

Friday 26 September

The Federal Reserve’s preferred measure of inflation is expected to indicate that price growth is accelerating. The headline Personal Consumption Expenditures (PCE) price index is expected to have risen 0.3% month-on-month and 2.8% year-on-year in August, faster than July’s increases of 0.2% m-o-m and 2.6% y-o-y. Meanwhile, the closely watched core PCE price index – which excludes volatile food and energy prices to paint a clearer picture of underlying inflation trends – is expected to have held at 0.3% on a monthly basis in August, while accelerating to 3% on an annual basis, up from 2.9% in July.

After the Fed cut its benchmark interest rate by 0.25 percentage points to a target range of 4% to 4.25% on 17 September, hot PCE data – or even data in line with estimates – could be a cause for concern among long-duration bondholders and those betting against the US dollar. A global rush into short positions on the dollar could be unwound if PCE surprises to the upside, as it would point to higher Treasury rates and a stronger dollar.

The Japanese yen had appeared to be on course to strengthen against the dollar, yet USD/JPY has remained stuck between ¥146.50 and ¥148.50 per dollar since early August. Any sign of US inflation heating up again is likely to send USD/JPY higher, signalling a weakening yen. In fact, a hot PCE report could push the pair towards the upper end of its long-term trading channel around ¥153. Conversely, cooler-than-expected PCE figures could trigger a fresh bout of dollar weakness, with USD/JPY potentially falling towards ¥140.

USD/JPY, September 2024 - present 

^{Sources: TradingView, Michael Kramer}

Economic and company events calendar

Major upcoming economic announcements and scheduled US and UK company reports include:

Monday 22 September

• Australia: September flash purchasing managers’ index (PMI) data
• China: People’s Bank of China interest rate decision
• Eurozone: September flash consumer confidence index
• Results: Elixirr International (HY), Firefly Aerospace (Q2)

Tuesday 23 September

• Eurozone, France, Germany, UK, US: September flash PMI data
• Results: AutoZone (Q4), Kingfisher (HY) Micron Technology (Q4), Oxford Biomedica (HY), Raspberry Pi (HY), Smiths (FY)

Wednesday 24 September

• Australia: August consumer price index (CPI)
• Japan: Bank of Japan monetary policy meeting minutes
• Results: Cintas (Q1), JD Sports Fashion (HY)

Thursday 25 September

• Switzerland: Swiss National Bank interest rate decision
• Japan: September Tokyo CPI
• US: Q2 gross domestic product (GDP), weekly initial jobless claims 
• Results: Accenture (Q4), CarMax (Q2), Costco Wholesale (Q4), Jabil (Q4), TD Synnex (Q3)

Friday 26 September

• Canada: July GDP
• Spain: Q2 GDP
• US: August personal consumption expenditures (PCE) price index
• Results: Ceres Power (HY)

Note: While we check all dates carefully to ensure that they are correct at the time of writing, the above announcements are subject to change.

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