Nike quarterly figures and EU inflation data in focus

EU inflation data: Further easing in September?

In line with the trend of recent months, eurozone inflation is expected to ease further, confirming the effectiveness of the European Central Bank's (ECB) monetary policy.

Key figures from the August inflation data:

Eurozone annual inflation: Eurozone inflation fell to 2.2% in August 2024, down from 2.6% in July. It is currently expected to slow to 1.9%. This is the lowest rate of inflation since July 2021 and is in line with the preliminary estimate.

Core inflation: Core inflation, which excludes volatile components such as food and energy, also fell slightly, from 2.9% the previous month to 2.8%. Today's inflation data is expected to come in at 2.7%.

Breakdown of August inflation data:

Services: Prices for services rose by 4.1%, slightly above July's 4%, and remained a key factor in inflation.

Food, alcohol and tobacco: This category also added to inflationary pressures, with prices rising by 2.3%, unchanged from the previous month.

Non-energy industrial goods: Inflation in non-energy industrial goods slowed from 0.7% to 0.4%, indicating lower price pressures in this sector.

Energy: Energy prices saw a significant decline of 3%, compared to a 1.2% increase in July. This sharp decline is due to lower oil prices and lower energy demand during the summer months.

Inflation trends in the main eurozone economies:

Inflation fell in the largest eurozone economies, including:

  -Germany: 2.0% (down from 2.6%)

  - France: 2.2% (down from 2.7%)

  - Italy: 1.2% (down from 1.6%)

  - Spain: 2.4%

  - Some smaller economies saw a slight increase in inflation, such as Latvia (0.9% vs. 0.8%) and Finland (1.1% vs. 0.5%).

ECB inflation forecast:

The European Central Bank forecasts average inflation of 2.5% in 2024, gradually falling to 2.2% in 2025 and 1.9% in 2026 . Core inflation is expected to remain slightly higher, averaging 2.9% this year before slowing to 2.3% in 2025 and 2.0% in 2026.

What to expect from September inflation data:

The September inflation report is likely to show a continued easing after the downward move in August. However, markets will be watching closely to see if core inflation – which strips out volatile energy and food prices – has fallen at a similar pace.

Market impact:

If inflation continues to fall, the ECB may be more willing to cut interest rates, which could be bullish for equities and bonds. Conversely, if inflation proves more stubborn, particularly due to a sluggish services sector, markets could become jittery, weighing on equities and increasing volatility in bond markets.

Expectations for Nike's 3Q earnings:

Earnings per share (EPS): Analysts expect Nike to report earnings of $0.52 per share. This is negative because earnings per share of $0.94 were reported in the same period last year.

Revenue: Quarterly revenue is expected to come in at $11.64 billion, down from $12.9 billion in the year-ago period.

Key factors to watch:

Declining sales – Nike has already warned of a 10% decline in sales in the first quarter. This could be largely due to a slowdown in Nike's digital business and a general lack of innovation. With a significant portion of Nike's sales coming from international markets, the company's performance in key regions such as China and Europe will be scrutinised. China remains in focus as the country's economic recovery has been slower than expected, adding to the weaker sales figures from China, one of the key markets.

 CEO Transition – CEO John Donahoe will step down and be succeeded by Elliott Hill, a retired insider. Hill previously held various leadership positions at Nike, managing operations in Europe and North America. He retired in 2020 after serving as president of the consumer and markets division. Investors seem confident in Hill's ability to lead the company, which faces challenges such as profit volatility, competitive pressures, and strategic long-termism. The leadership change could signal a realignment of the company's strategic direction, with a potential focus on the consumer-centric approach that Hill championed during his previous tenure at Nike.

NIKE Technical Analysis

Due to several issues at NIKE, such as falling wholesale and Chinese sales, the price is currently in a downward channel. The price is currently down 17% for the year and is at levels last seen in 2020. We have been below the 200-EMA since January 2024, and the 50-EMA has also widened. In mid-2024, we bounced off the psychological $70 mark and have been moving upwards ever since. At these levels, the 50EMA will act as a resistance level to continue rising from these levels. If the level is overcome, the next resistance could be at the top of the downward sloping channel. This resistance level also overlaps with the 200EMA, making this level a critical level to watch.

Assuming a downward trend, the low of 2024 at the $70 level could serve as support for further downside movement. However, if this level is breached, the price could find the next support at $65.