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Top 5 Things to Watch in Markets in the Week Ahead

Economy Jun 12, 2022 07:31AM ET
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© Reuters.

By Noreen Burke

Investing.com -- It’s going to be a big week for central banks, with the Federal Reserve widely expected to deliver a second 50 basis point rate hike on Wednesday. Investors will be watching closely to see what Fed Chair Jerome Powell has to say about future rate hikes after Friday’s much stronger than expected inflation data. The Bank of England is expected to deliver a fifth consecutive rate hike amid a mounting cost of living crisis. The Bank of Japan and the Swiss National Bank will also hold policy meetings. U.S. retail sales data will give an insight into whether inflation is eroding households' spending power and equity markets look set for another turbulent week. Here’s what you need to know to start your week.

  1. Fed to hike again

The Fed is all but certain to raise interest rates by another 50 basis points on Wednesday, adding to the 75 bps of rate hikes already delivered since March.

A further half-percentage-point is priced in for July, with a strong chance of a similar move in September but this is less clear cut.

Friday’s hot May inflation data has revived fears that Powell could flag a faster pace of future rate hikes. Investors are concerned that an aggressive push higher on rates by the Fed could tip the economy into recession.

Market watchers will be keeping a close eye on Powell’s press conference after the policy meeting and on the Fed’s updated economic forecasts and its “dot plot”, which shows the projected outlook for interest rates.

  1. BoE to deliver 5th straight rate hike

The BoE is widely expected to deliver what will be its fifth consecutive 25 bps rate hike since December on Thursday, despite a growing number of global central banks opting for half-point hikes.

The BoE was the first major central bank to start reversing its pandemic stimulus back in December but that did not stop U.K. inflation hitting a four-year high of 9% in April, almost five times the BoE's 2% target.

The BoE expects inflation to exceed 10% later this year and Governor Andrew Bailey said in April the bank was walking a very tight line between tackling the surge in inflation and causing a recession.

It’s also a busy week for U.K. economic data, starting with GDP figures for April on Monday, which are expected to be flat. Employment data on Tuesday is expected to point to continued tightness in the labor market, with unemployment expected to decline while wage gains accelerate. 

  1. BOJ, SNB to meet

The BOJ meets Friday and is widely expected to stick to its ultra-easy monetary policy stance, but pressure to change tack is growing with widening yield differentials pushing the yen to multi-decade lows, adding to inflationary pressures.

The SNB is not expected to make a change to its -0.75% interest rate - the world's lowest – when it meets on Thursday. But with Swiss inflation hitting the highest in 14 years in May and the prospect of the European Central Bank hiking rates in July, a shift towards rate hikes may finally come about.

Meanwhile, ECB President Christine Lagarde is to make what will be a closely watched speech Wednesday after saying last week that the ECB would next month deliver its first rate hike since 2011, followed by a potentially larger move in September.

  1. U.S. data

The U.S. is to release data on retail sales for May on Wednesday which are expected to slow amid weaker auto sales. Numbers on industrial production, due out on Friday, are also expected to slow but remain solid.

The economic calendar also features a report on producer price inflation on Tuesday, along with data on initial jobless claims and housing starts on Thursday.

Data on Friday showed that U.S. consumer inflation jumped by 8.6% year-over-year in May, its biggest gain since 1981 with gasoline marking a record high and the cost of food soaring.

Soaring price pressures are forcing consumers to change their spending habits, fueling fears of a recession.

  1. Stock market volatility

U.S. stocks recorded their biggest weekly percentage declines since January and ended sharply lower on Friday after the May inflation report put paid to hopes that price pressures may have peaked.

Stocks have fallen for most of the year amid worries over inflation, rising interest rates and the likelihood of a recession.

Market declines had partially reversed over the last few weeks on hopes that a potential peak in inflation would allow the Fed to turn less aggressive later this year.

"Given that price pressures in the U.S. show little sign of easing, we doubt that the Fed will take its foot off the brakes anytime soon," analysts at Capital Economics wrote on Friday. "We therefore suspect that more pain is yet in store for U.S. asset markets, with Treasury yields rising further and the stock market remaining under pressure."

--Reuters contributed to this report

Top 5 Things to Watch in Markets in the Week Ahead
 

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Comments (35)
Ken Roth
Ken Roth Jun 13, 2022 7:33AM ET
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Piss off nils russians are not welcome here
Jun 13, 2022 5:22AM ET
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dems slogan for midterm election...we destroy pensions and make you homeless vote for us
Mike Simms
Mike Simms Jun 13, 2022 4:32AM ET
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One thing for certain, panic will continue.
Meru Pet
Meru Pet Jun 13, 2022 4:32AM ET
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if it goes down, it is because some people are selling calmly
Mike Simms
Mike Simms Jun 13, 2022 4:32AM ET
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Meru Pet very little calm selling. This is all sheer panic.
Larry DeAngelis
Larry DeAngelis Jun 12, 2022 10:11PM ET
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Looks like the whales in crypto have turned into guppies!!!
Larry DeAngelis
Larry DeAngelis Jun 12, 2022 10:10PM ET
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It looks Ike the whales in cryptohave turned into guppies!!` That is for all the buy the dipshits out there!!
Kerry Ditto
Kerry Ditto Jun 12, 2022 9:28PM ET
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cutting taxes instead of raising interest rates is needed.
El Hu
El Hu Jun 12, 2022 9:28PM ET
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Please Google a intro to economics book
Chris Murdock
Chris Murdock Jun 12, 2022 8:39PM ET
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should we be backing the EUD or the USD it all seems as turbulent as cryptocurrency at the moment?
Kerry Ditto
Kerry Ditto Jun 12, 2022 8:20PM ET
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it would be insane to raise 50 bp this week. 25 bp would be wise.
El Hu
El Hu Jun 12, 2022 8:20PM ET
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Looks like someone bought too much property they can't sell now..
Kerry Ditto
Kerry Ditto Jun 12, 2022 5:09PM ET
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US stock market probably moves higher due to oversold. Small caps will be in best position to go higher. Too many cheap stocks.
David Wolf
Idiocracy Jun 12, 2022 5:09PM ET
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LOL just because you say they’re cheap doesn’t mean they’re cheap
Noah Kim
Noah Kim Jun 12, 2022 5:09PM ET
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Cheap stocks lol
Larry DeAngelis
Larry DeAngelis Jun 12, 2022 4:28PM ET
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10% down day tomorrow.
PARTHA SARATHY
PARTHA SARATHY Jun 12, 2022 4:28PM ET
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which one 10% down bro
Larry DeAngelis
Larry DeAngelis Jun 12, 2022 4:28PM ET
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S&P dude
 
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