(Reuters) - A raft of U.S. data and European inflation numbers will give guidance on how the world's top central banks will navigate the way ahead - including whether we're heading for that hotly debated "no landing" scenario.
China's post Lunar New Year business activity data will give a reading of the health of the world's number-two economy whilst Nigerians head to the polls in the first of this year's key emerging market elections.
Here's a look at the week ahead in markets from Ira Iosebashvili in New York, Rae Wee in Singapore and Naomi Rovnick, Dhara Ranasinghe and Karin Strohecker in London.
1/ FED VS STOCKS
Reports on U.S. durable goods orders, home prices as well as manufacturing and consumer confidence threaten to cement expectations of more Fed rate hikes and to deal a knockout punch to the early-year stocks rally.
Evidence of a stronger-than-expected economy has forced investors to recalibrate projections for Fed hawkishness, lifting bond yields and weighing on stock gains. The S&P 500 has managed to hang on to a 4.5% year-to-date gain but is well off its highs.
Tuesday's consumer confidence data may be of particular interest, offering a glimpse into households' views on economic prospects and inflation expectations. Economists polled by Reuters expect a median reading of 109.5 on the index, which unexpectedly fell in January.
Graphic 1: U.S. consumers seen more upbeat in February, https://www.reuters.com/graphics/USA-CONSUMERS/T5/lbpgglgkopq/chart.png
2/ BUCKLING UP FOR NO LANDING
Are economic conditions becoming too rosy for markets to bear? The idea of "no landing," which upends a host of popular trades based on a the scenario of the global economy entering recession is gaining traction thanks to surprisingly upbeat data.
China has reopened from COVID lockdowns, U.S. labour markets are booming and consumer spending is holding up, while Europe's energy crisis has eased.
Still, inflation remains sticky, which could keep big central banks on their hawkish path of raising interest rates further.
This is inconvenient for investors who bought government bonds and bet on a softer dollar this year, expecting economies would decelerate and central banks would pause rate-hike campaigns. A soft landing could still happen. But if data in coming days signal that growth and inflation remain robust, equity and bond markets may turn lower still.
Graphic 2: Economic growth forecasts turn higher, https://www.reuters.com/graphics/GLOBAL-MARKETS/zdvxdxojnvx/chart.png
3/INFLATION WEEK
It's inflation week in the euro area. Preliminary February data from Germany, France, Spain and Portugal are due on Monday and Tuesday, followed by the bloc-wide flash number on Thursday.
Price pressures are abating: headline euro area inflation eased to 8.6% in January from 9.2% a month earlier. Still, Thursday's numbers are unlikely to placate European Central Bank hawks pushing for aggressive rate hikes to continue.
Focus will likely stay on core inflation, stripping out volatile food and energy prices. It's proving stubborn and could still rise from January's 5.3%.
Markets have got the message and renewed bets on the ECB 2.5% depo rate moving higher. Deutsche Bank (ETR:DBKGn) just raised its forecast for the peak in ECB rates to 3.75% from 3.25%.
Graphic 3: ECB still in rate-hiking mode to contain inflation, https://www.reuters.com/graphics/GLOBAL-MARKET/znpnbxbjypl/chart.png
4/ROARING RESTART
China's reopening came fast and furious after a three-year lull. Wednesday's PMI releases could show whether factory activity in the world's second-largest economy has returned with a bang or a whimper after the Lunar New Year break.
Strong figures could revive some of the waning enthusiasm for the reopening trade - where optimism seems to be fizzling out. The A-share blue-chip CSI 300 Index is largely flat on the month after surging 7% in January.
Retail investors are sitting out the stocks rally, and the recent disappearance of star Chinese dealmaker Bao Fan has investors worrying that Beijing's regulatory crackdowns are far from over. Escalating tensions between Washington and Beijing over a suspected Chinese spy balloon and Taiwan loom large over the China investment thesis.
Graphic 4: China economic activity rebounds in January 2023, https://www.reuters.com/graphics/GLOBAL-MARKET/dwpkdzdqqvm/chart.png
5/ TIME TO VOTE
Nigerians vote on Saturday in what could be their most credible and close electoral contest since military rule ended nearly a quarter of a century ago. It's also the first election in which a presidential candidate who is not from one of the two main parties stands a chance.
Whoever Nigerians choose to succeed President Muhammadu Buhari will have to resolve a litany of crises that have worsened under the current administration - from widespread banditry and militant violence to systemic corruption, and from high inflation to widespread cash shortages.
Many other emerging market economies are also approaching election crossroads. Turkey's government under President Tayyip Erdogan could hold elections in the wake of the devastating earthquake as scheduled in June. Argentina's Peronists are seeking re-election in October and Pakistan voters will likely head to the ballot box the same month.
Graphic 5: Nigeria's soaring inflation, https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/zjpqjyjmmvx/chart.png