This past week, volatility dominated the global stock markets. Investors will be preparing for new volatility in the coming week as central banks and governments stepped up their fight against inflation. A number of Federal Reserve employees are scheduled to speak. The Friday personal income and spending report will be the main event on the United States economic calendar.
Prior to Eurozone CPI, Monday in Brussels, ECB President Christine Lagarde is scheduled to appear before lawmakers. The health of the world’s second-largest economy will be revealed by Chinese PMI data released on Friday.
Here are the top news investors will be watching out for in the week
Fed Speak, U.S. Data
Investors are watching for clues as to whether a fourth consecutive 75 bps rate hike is planned for November from St. Louis Fed President James Bullard, Cleveland Fed President Loretta Mester, Chicago Fed head Charles Evans, Atlanta Fed President Raphael Bostic, and Fed Vice Chair Lael Brainard, who are all scheduled to speak this week.
The economic calendar includes information on new and pending home sales, consumer confidence, and reports on orders for durable goods.
The personal consumption expenditures price index, the Fed’s preferred inflation gauge, will be included in the August data on personal income and expenditures, which will be released on Friday.
Due to recent decreases in fuel prices, economists anticipate a moderate annualized decrease in the PCE price index, but an increase in the core PCE price index, which excludes food and energy.
Market Stock Selloff
The Nasdaq fell 5.03% last week, marking its second consecutive week of declines of more than 5%, while the S&P 500 ended the week down 4.77% and the Dow fell 4%.
The Dow narrowly avoided going into a bear market alongside the S&P 500 and the Nasdaq.
As investors rebalanced their portfolios for a world of persistent inflation and rising interest rates, a collapse in the bond markets increased pressure on stocks. The Fed’s announcement last week that it expects high U.S. rates to persist through 2023 caught investors off guard.
Investors are concerned that the Fed’s tightening will cause the economy to enter a recession, despite recent data showing that the U.S. economy is still relatively strong.
In addition to tightening financial conditions globally, a number of other issues, such as the conflict in Ukraine, the energy crisis in Europe, and China’s COVID-19 flare-ups, have had a negative impact on market sentiment.
Consumer price inflation data for September will be released for the Eurozone on Friday. Economists anticipate that the headline rate of inflation will increase to a new record high of 9.6%, maintaining pressure on the ECB as it considers how much to raise interest rates in the face of an impending recession.
Prior to that, ECB President Christine Lagarde is scheduled to appear before the Committee on Economic and Monetary Affairs in Brussels on Monday. During her testimony, she is likely to be questioned about how the central bank intends to combat inflation as the region prepares for a possible recession.
Investors will also be keeping an eye on Sunday’s election results in Italy, which are predicted to produce the nation’s most right-wing administration since World War II.
The new government’s ability to manage a debt load that is roughly equal to 150% of GDP is a concern for financial markets as well as European Union leaders who fear that Italy will become a more unpredictable partner.
YEN, BoJ Intervention
On Thursday, the Japanese government decided that enough was enough and intervened in the foreign exchange markets for the first time since 1998.
Following the change, the Japanese yen recorded its first weekly gain of 0.3% against the dollar in more than a month.
The Bank of Japan has continued to maintain its commitment to ultra-low interest rates, but the dollar has gained more than 20% against the yen this year, and the Fed appears poised to keep raising interest rates aggressively until inflation is under control.
The proposition is still valid for a strong dollar. Japan may find itself at odds with fundamentals, the market, and the Fed as it pushes back against the dollar alongside neighbors China and Korea.
In a speech scheduled for Monday, BoJ Governor Haruhiko Kuroda is expected to provide additional details regarding Japan’s decision to intervene.
China PMIs Data
On Friday, China will release its PMI data, which will be closely scrutinized for clues as to whether the nascent economic recovery persisted in September.
A fragile recovery was supported in August by faster-than-expected growth in factory output and retail sales, but the outlook was clouded by a worsening real estate slump.
Since there are few indications that China will significantly relax its zero-COVID policy any time soon, some analysts predict that the country’s economy will expand by just 3% this year, which would be the slowest growth rate since 1976, excluding the 2.2% growth that occurred before the initial COVID hit in 2020.
Since late May, China has announced a wide range of economic support measures, but the case for looser monetary support has become more challenging as a result of the Chinese yuan’s sharp decline against the US dollar.
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