Investing.com - Politics and trade rhetoric could hang over the market in the coming week, as investors look ahead to U.S. midterm elections, in which polls suggest the Democratic Party will win control of the House of Representatives.
President Donald Trump's Republicans are likely to keep the Senate, but a hung Congress could hamper his ability to push through his tax and spending plans.
The U.S.-China trade spat should also be in the headlines amid conflicting reports last week on global trade.
President Trump said Friday that he will likely make a deal with China on trade, adding that a lot of progress had been made to resolve the two countries' differences. Trump's comments come after Larry Kudlow, his top economic advisor, expressed caution about talk of a possible U.S.-China trade agreement.
Global financial markets will also focus on this week's Federal Reserve meeting. While no change in policy is expected, investors will be looking for fresh signals from the U.S. central bank on its plans for the rest of the year and beyond.
The Fed raised borrowing costs in September for the third time this year. Solid economic growth combined with rising inflation are likely to keep it on track for another increase in December, despite mounting verbal pressure from the White House.
Fed fund futures currently price in an increase at the end-of-the-year meeting at a probability of around 78%, according to Investing.com’s Fed Rate Monitor Tool.
Meanwhile, on the economic calendar, the October report on U.S. producer prices, which should give clearer signs on the pace of inflation, will be the biggest data point of the week.
In earnings, about 40 S&P 500 companies are due to report financial results this week, in what will be the last big wave of the third-quarter earnings season.
Elsewhere, in Asia, China is slated to release what will be closely watched monthly trade figures. Investors will study the data to see if the ongoing trade conflict with the U.S. had any impact on exports and imports in September.
Trade-war fears have been simmering for months, with investors jittery over the prospects of further escalation in tensions between the world's two largest economies having an impact on global growth.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. U.S. Midterm Elections
Control of both houses of the U.S. Congress, currently dominated by Republicans, and 36 governors' offices will be at stake when Americans vote in Tuesday's elections.
Opinion polls and nonpartisan forecasters generally show Democrats with a strong chance of taking the 23 additional seats they would need for a majority in the House of Representatives, which they could use to launch investigations into Trump's administration and block his legislative agenda.
Republicans are favored to retain control of the Senate, whose powers include confirming Trump's nominations to lifetime seats on the Supreme Court.
Interest has been unusually high for a non-presidential election year, with early voting running well ahead of past cycles.
As of Friday night, almost 32.4 million people had cast ballots early, according to The Election Project at the University of Florida, which tracks turnout. That is up more than 50% from the 20.5 million early votes cast in all of 2014, the last federal election when the White House was not at stake.
2. Federal Reserve Rate Decision
The Federal Reserve is not expected to take action on interest rates at the conclusion of its two-day policy meeting at 2:00PM ET (19:00GMT) on Thursday, keeping it in a range between 2.0%-2.25%.
The central bank will release its accompanying rate statement at the same time, which investors will scrutinize for any hints on how the Fed views inflation and the economy.
Investors are worried that rising wages and increasing inflationary pressures will push the Fed to raise rates at a faster pace than expected.
The Labor Department's closely watched monthly employment report on Friday underlined solid U.S. growth and a tight labor market, with 250,000 jobs added in October and wages recording their best annual gain in almost a decade. The unemployment rate held steady at a 49-year low of 3.7%.
3. U.S. Producer Price Inflation Data
The Commerce Department will publish October producer price inflation figures at 8:30AM ET (13:30GMT) Friday.
Excluding the cost of food and fuel, core producer price inflation is projected to climb 2.3% on a year-over-year basis, a tad slower than the 2.5% increase registered in September.
Besides the PPI data, this week's rather light economic calendar also features the Institute for Supply Management’s gauge on non-manufacturing economic activity and a preliminary reading of the University of Michigan's consumer sentiment index.
4. Earnings Season Starts to Wind Down
There are about 75 S&P 500 companies reporting results in the week ahead, as the earnings season on Wall Street starts to wind down.
Results from CVS Health (NYSE:CVS), Etsy (NASDAQ:ETSY), Eli Lilly (NYSE:LLY), Ralph Lauren (NYSE:RL), Twilio (NYSE:TWLO), Match Group (NASDAQ:MTCH), Papa John's (NASDAQ:PZZA), and Turtle Beach (NASDAQ:HEAR) will capture the market's attention on Tuesday.
Square (NYSE:SQ), Qualcomm (NASDAQ:QCOM), Wynn (NASDAQ:WYNN), Roku (NASDAQ:ROKU), Groupon (NASDAQ:GRPN), Michael Kors (NYSE:KORS), Dean Foods (NYSE:DF), and Office Depot (NASDAQ:ODP) report results on Wednesday.
5. China Trade Figures
China is to release October trade figures on Thursday morning.
The report is expected to show that the country’s trade surplus widened to $36.2 billion last month from $31.7 billion.
Recent data has started to show that China's economy may be losing steam, raising concerns about the potential fallout from the ongoing U.S.-China trade dispute.
The U.S. has slapped tariffs on more than half of over $500 billion in Chinese imports, for which China has retaliated, after several rounds of negotiations failed to resolve U.S. complaints over Chinese industrial policies, lack of market access in China and a $375 billion U.S. trade deficit.
Stay up-to-date on all of this week's economic events by visiting: http://www.investing.com/economic-calendar/
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