Top 5 things to watch in the markets next week

Top 5 things to watch in the markets next week

Written by Noreen Burke – After a week that saw financial markets shaken as central banks and governments ramped up their war against inflation, investors will be bracing for fresh volatility in the coming week. Several Federal Reserve officials are due to speak, after they raised the interest rate for the third time in a row by 75 basis points with no pause in sight. The highlight of the US economic calendar will be Friday’s data on personal income and spending, which includes the Fed’s preferred inflation measure. In the Eurozone, inflation data on Friday is likely to increase pressure on the European Central Bank. Before that, European Central Bank President Christine Lagarde is due to testify before lawmakers in Brussels on Monday, while the results of Italy’s election on Sunday will be closely watched. The yen will remain in focus after the Bank of Japan’s intervention in the foreign exchange markets. Meanwhile, Chinese PMI data on Friday will give insight into the health of the world’s second-largest economy. Here’s what you need to know to start your week.

  1. Fedspeak, US data

Louis Fed President James St. Louis, Cleveland Fed President Loretta, Chicago Fed President Charles Evans, Atlanta Fed President Rafael Bostick and Fed Vice Chairman Lyle are set to speak during the week, with investors warning of indicators About whether a fourth straight 75 bps is on the cards in November.

The economic calendar features reports on, along with data on and.

The highlight of the economic calendar will be August and Friday data which includes the PCE price index, the Fed’s preferred inflation measure.

Economists expect the annual increase in fuel prices to moderate due to recent declines in fuel costs, but that which excludes food and energy is expected to increase.

  1. sell stock
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Wall Street’s major indices last week suffered heavy losses with a 5.03% drop – the second consecutive week that fell more than 5% – while ending down 4.77% and down 4%.

The Dow Jones avoided joining the S&P 500 and Nasdaq in a hard bear market.

The crash in the bond markets has added to the pressure on stocks as investors readjust their portfolios in a world of persistent inflation and rising interest rates. Investors were surprised after they expected high US interest rates to continue until 2023.

While recent data indicated that the US economy remains relatively strong, investors are concerned that the Fed’s tightening will push the economy into recession.

“We’re making everyone reassess exactly how far the Fed is going, and that’s worrying for the economy,” Ed Moya, chief market analyst at Oanda, told Reuters on Friday.

“The base scenario has become that this economy is going to have a hard landing, and this is a terrible environment for US stocks.”

In addition to tightening financial conditions around the world, market sentiment has been hit hard by a host of other issues including the conflict in Ukraine, the energy crisis in Europe, and the coronavirus outbreak in China.

  1. Eurozone Consumer Price Index

The euro zone will release data for September on Friday as economists expect the headline inflation rate to accelerate to a new record high of 9.6%, keeping pressure on the European Central Bank as it grapples with the amount of interest rate hikes in the face of a looming recession.

Before that, European Central Bank President Christine Lagarde is due to testify before the Economic and Monetary Affairs Committee in Brussels on Monday, where she will likely face questions about how the central bank plans to deal with inflation as the bloc faces the prospect of a recession.

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Investors will also be watching Sunday’s results, which are expected to result in the formation of the country’s most right-wing government since World War II.

European Union leaders, eager for unity after the Russian invasion of Ukraine, worry that Italy will be an unpredictable partner, while financial markets will be concerned about the new government’s ability to manage a debt burden of around 150% of GDP.

  1. yen intervention

Japanese authorities are finally fed up with the weak yen on Thursday when it was for the first time since 1998.

It posted its first weekly gain of 0.3% in more than a month against the dollar after the move.

But the dollar is up more than 20% against the yen this year with the Bank of Japan sticking to its commitment to ultra-low interest rates, while the Fed appears ready to continue raising rates until inflation is brought under control.

So the case for a strong dollar is still there. Japan, along with its neighbors China and Korea, which are resisting the dollar, may find themselves fighting the fundamentals, the market and the Federal Reserve.

He is to deliver a speech on Monday where he is expected to provide more insights into Japan’s decision to intervene.

  1. PMIs in China

China is to release data on Friday which will be closely watched for indications of whether the nascent economic recovery has continued into September.

Recent economic data indicated resilience in August, as faster-than-expected growth in factory production and retail sales supported the fragile recovery, but a worsening housing slump weighed on the outlook.

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With few indications that China will significantly ease its coronavirus non-proliferation policy soon, some analysts expect the world’s second-largest economy to grow just 3% this year, the slowest since 1976, excluding the 2.2% expansion during the initial hit of Covid. In the year 2020. .

China has announced a wide range of economic support measures since late May, but rapid declines in the US dollar have complicated the issue of more flexible monetary support.

–Reuters contributed to this report

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