Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Take Five: Interest rate lift-off ahead

Published 08/13/2021, 04:09 AM
Updated 08/13/2021, 12:06 PM
© Reuters. The Wall St. sign is seen outside the New York Stock Exchange (NYSE) in New York, U.S., December 17, 2019. REUTERS/Brendan McDermid

© Reuters. The Wall St. sign is seen outside the New York Stock Exchange (NYSE) in New York, U.S., December 17, 2019. REUTERS/Brendan McDermid

LONDON (Reuters) - Below are five events and themes likely to dominate global financial markets next week.

1/ READY, STEADY, GO

New Zealand's central bank meets on Wednesday and looks set to become the first major economy to lift interest rates since COVID-19 hit.

Super-strong jobs data have cemented expectations of a hike, which would be New Zealand's first since mid-2014. What a contrast with 2020, when rates were slashed 75 bps to 0.25% and a move below zero became a real possibility.

Norway's central bank, meeting on Thursday meanwhile, could reiterate it will increase rates in September.

Investors, focused on prospects for Fed tapering as labour conditions improve, have boosted the dollar. New Zealand and Norway are a reminder that the greenback is not the only currency standing to benefit from the monetary policy shift under way in the G10.

- New Zealand inflation expectations jump in Q3 -RBNZ

(GRAPHIC - Major currencies year-to-date performance: https://fingfx.thomsonreuters.com/gfx/mkt/akvezgbmgpr/theme1208.PNG)

2/ MALLRATS

The U.S. economy is growing robustly and the labour market is rebounding. However, COVID-19 remains a headwind and coming days should bring a fresh perspective on how consumers are faring.

U.S. retail sales likely fell 0.2% in July, after an unexpected rise in June, data on Tuesday is expected to show.

And several large retailers including Walmart (NYSE:WMT), Target (NYSE:TGT), Lowe's (NYSE:LOW) and Home Depot (NYSE:HD) will report quarterly results. Earnings are due too from Ross Stores (NASDAQ:ROST), TJX Companies (NYSE:TJX) and Bath & Body Works.

These come at the end of a stellar U.S. second-quarter results season. S&P 500 earnings are expected to have jumped 93.1%, well above prior expectations of 65.4%, according to Refinitiv IBES.

Fed policymakers, assessing when to start unwinding stimulus, will be watching.

-Fed officials grapple over timeline for tapering asset purchases

(GRAPHIC - U.S. retailer stock performance in 2021: https://graphics.reuters.com/USA-STOCKS/RETAIL/zjpqkqbdgpx/chart.png)

3/ DELTA BLUES

The Delta variant is close to breaching Asia's COVID-zero fortresses, with outbreaks and lockdowns looming over what once appeared the world's most promising regional rebound.

    Save for Taiwan and New Zealand, where strict border controls appear to have kept the variant at bay, cities from Sydney to Seoul are finding it hard to contain infections.

    In China, Delta has been detected in over a dozen cities, bearing down on a faltering economy, forcing economists to cut growth forecasts.

We will get a snapshot of how the economy fared in July as local activity and flight curbs bit - retail sales, industrial output and house price numbers are all due on Monday.

    - China's COVID outbreak hitting services sector, travel, hospitality

- Wall Street investment banks cut China growth forecasts

(GRAPHIC - Tickets issued for Chinese domestic air travel: https://fingfx.thomsonreuters.com/gfx/ce/zjpqkqbrdpx/domestic%20flight%20bookings.jpg)

4/ APOCALYPSE NOW

If this summer has shown us anything, it's a glimpse of the sort of havoc the planet faces if the climate emergency is not fixed fast.

Apocalyptic forest fires, floods and drought are laying waste to swathes of Greece, Canada, Turkey, China, Argentina and the United States. Extreme weather consequences include deaths, homelessness, social unrest and rising government debt.

The climate emergency will raise costs everywhere: insurance covers just 60% of disaster-linked losses even in rich North America; it falls to 10% in China, Swiss Re (OTC:SSREY) estimates. Worse still, the fires are exacerbating emissions, while forests meant to act as carbon sinks will take decades to regrow.

Until now, warnings, including a recent United Nations one, have had limited impact. But with a global climate conference due in November, this summer's climate disasters might well swing the pendulum.

-U.N. sounds clarion call over 'irreversible' climate impacts

(GRAPHIC - Global warming resulting in higher mean temperature and precipitation: https://graphics.reuters.com/CLIMATE-CHANGE/IPCC-REPORT/myvmnmeozpr/IPCC_simulations.jpg)

5/ AFGHAN ABYSS

The Taliban's rapid advance towards Kabul has raised alarm not only about Afghanistan's future but also the wider spillover in what is already a dangerous neighbourhood.

Iran to the west, the central Asian republics of Tajikistan, Turkmenistan and Uzbekistan to the north may be at risk, but for markets, Pakistan to the east will be the immediate focus.

Pakistan has lots of debt and a sizable equity market. It also depends on a $6 billion IMF programme. The prospect of years of Taliban violence and mass waves of Afghan refugees will add to the struggle to repair its finances.

- Taliban take strategic Afghan city of Ghazni on road to Kabul

© Reuters. The Wall St. sign is seen outside the New York Stock Exchange (NYSE) in New York, U.S., December 17, 2019. REUTERS/Brendan McDermid

- IMF says Pakistan talks ongoing; more work needed on structural reforms

(GRAPHIC - Taliban flashpoints in Afghanistan: https://graphics.reuters.com/AFGHANISTAN-CONFLICT/FLASHPOINTS/egvbkndqqpq/chart.png)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.