JAKARTA - Global markets are waiting for the release of US economic and inflation growth data this week. The figures will be an important clue. How far the Middle East tensions are pressing the world economy.
Citing an Anadolu Agency report, Tuesday, May 26, tensions between the United States, Israel, and Iran, which began in late February, began to ease after a fragile ceasefire took effect on April 8. Oil price pressure from risks around the Strait of Hormuz also fell.
However, the problem is not over. The energy price that had risen could still potentially drive inflation through transportation costs, industrial production, electricity, and heating.
March and April data showed that rising energy prices during the conflict also put pressure on global prices.
Market attention is now focused on the US core Personal Consumption Expenditures or PCE index, which will be released on Thursday. Core PCE is the Federal Reserve's preferred measure of inflation because it is considered to better reflect changes in consumer spending.
Analysts expect core PCE to rise 0.3 percent on a monthly basis and 3.3 percent on an annual basis in April.
On the same day, the US will also release its second estimate of first-quarter gross domestic product or GDP. GDP is the value of all goods and services produced by a country.
The U.S. economy is expected to grow 2 percent in the first quarter. Preliminary data from the U.S. Department of Commerce earlier showed the economy grew 2 percent in January-March, below the 2.2 percent projection.
These inflation and growth data are important because they could affect the central bank's moves. The Federal Reserve is expected to take additional tightening steps at the December meeting.
In the eurozone, falling energy prices give hope that inflationary pressures are starting to weaken. However, the European Central Bank or ECB is still expected to continue tightening because energy-driven inflation had increased in March and April.
Markets expect the ECB to raise rates at least twice before the end of the year.
Preliminary data on German inflation for May will also be released on Friday. Analysts expect the German consumer price index to rise 0.2 percent on a monthly basis and 3 percent on an annual basis.
From Asia, the signal is not yet completely comfortable. Weaker than expected Chinese data shows that global demand is still fragile and geopolitical uncertainty continues to weigh on growth prospects.
China's industrial output rose 4.1 percent year on year in April, lower than expected. Retail sales rose only 0.2 percent, also below expectations.
In Japan, annual inflation in April was 1.4 percent, lower than expected and down from March. Markets are now waiting for Tokyo's inflation data for May, which is expected to rise 1.6 percent on an annual basis.
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