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Top 5 Things to Watch in Markets in the Week Ahead

Economy Jun 26, 2022 07:20AM ET
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© Reuters

By Noreen Burke

Investing.com -- The European Central Bank will hold its annual retreat in Portugal, where President Christine Lagarde, along with Federal Reserve Chair Jerome Powell and Bank of England Governor Andrew Bailey will appear at a panel discussion on Wednesday. The first half of what has been an exceptionally turbulent year in markets is ending, with investors wondering whether the next six months could bring some respite or more volatility. The economic calendar features the PCE price index - an inflation gauge watched by the Fed - along with the latest inflation data out of the Eurozone and Chinese PMIs. Here’s what you need to know to start your week.

  1. Sintra forum

The ECB’s three-day forum in Portugal's Sintra gets underway on Monday against a backdrop of worries over whether central bank moves to stamp out the strongest inflation surge in decades could tip the global economy into a recession.

The forum will be focusing on “challenges for monetary policy in a rapidly changing world.”

Investors will be closely watching Wednesday’s panel discussion with Lagarde, Powell and Bailey for insights on how the central bank heads view the trade-off between curbing inflation while still trying to ensure a soft-landing for the global economy.

Comments by ECB officials will also be closely watched for any more details on a planned anti-fragmentation tool.

  1. Torrid first half draws to a close

Six months characterized by the fastest rate-hiking cycle in decades, market turmoil and a war that spurred spiraling inflation are drawing to a close, leaving investors to ponder what the second half may bring.

The S&P 500 is down around 18% year-to-date, and bonds have fared little better: The U.S. bond market, as measured by the Vanguard Total Bond Market Index Fund (NASDAQ:BND), is down 10.8% for the year to date.

With investor expectations fluctuating between continued high inflation and an economic downturn caused by a hawkish Fed, few believe the market's volatility will subside anytime soon.

"Inflation is still rising and that means the Fed will hike more and move more rapidly, which will put downward pressure on the economy, so that's adding to recession fears," Seema Shah, chief strategist at Principal Global Investors told Reuters.

"There are also growing signs of economic weakness coming earlier than expected."

  1. U.S. economic data

The U.S. is to release a raft of economic data in the coming week which will show how the economy is faring amid the Fed’s aggressive rate hiking cycle.

Investors will be closely watching Thursday’s May data on the personal consumption expenditures price index for indications on whether inflation is cooling.

Economists are expecting durable goods orders to slow, consumer confidence to deteriorate further and manufacturing surveys to weaken further, adding to concerns over the economic outlook.

A report on pending home sales and the Case-Shiller home price index should show how much rising mortgage rates are hitting the housing sector.

Several Fed officials are also due to make appearances during the week including New York Fed President John Williams, San Francisco President Mary Daly, Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard.

Last Friday, Daly - who is generally a policy dove - indicated that she supported a 75 basis point rate hike at the Fed’s upcoming July meeting.

  1. Eurozone inflation

The Eurozone is to publish consumer price inflation data for June on Friday, which is expected to hit a fresh record high of 8.3% year-over-year as energy and food costs continue to soar.

Eurozone inflation hit a record 8.1% in May, over four times higher than the ECB’s 2% annual target.

The inflation data will likely add fuel to the debate over whether the ECB should deliver larger interest rate hikes after a quarter-point increase flagged for July, in what will be its first move to tighten policy in more than a decade.

National inflation figures from Spain and Germany will be released on Wednesday.

Meanwhile, Eurozone consumer confidence data the same day is expected to remain depressed amid ongoing concerns over the economic impact of elevated inflation and the war in Ukraine.

  1. China data

China is due to release data on industrial profits on Monday, followed by PMI data on Thursday and Friday, respectively.

Positive numbers could offer some hope to downbeat financial markets.

Zero-COVID lockdowns and a slowing global economy have pushed the growth-bellwether copper price almost 10% lower in two weeks in Shanghai.

But lockdowns have eased and if the data points to a return to growth, it would be a welcome signal for the economy and for those who see Chinese stocks as a haven from the stagflation fears gripping the West.

--Reuters contributed to this report

Top 5 Things to Watch in Markets in the Week Ahead
 

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Comments (9)
Ratree Poolsappasit
Ratree Poolsappasit Jun 26, 2022 5:27PM ET
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Thank you🙏
Kurt Mr
Kurt Mr Jun 26, 2022 3:31PM ET
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No surprise here with the Biden administration curtailing US energy exports by shutting down the Keystone pipeline, halting drilling leases, and allowing the Russian pipeline to draw European dependence to their oil/gas production. So couple our high energy costs to the Fed's monetary policy of $120B a month bond purchases plus unrivaled spending by Congress leading to a $30T national debt, it's no wonder we are in a bear market. Now the Federal Reserve is in a no win situation. Raise rates and the housing market bubble bursts, don't raise interest rates and you have runaway inflation. Either way, a Democrat controlled Congress and President that blocks US oil production is the cause for high gas prices. Soaring energy costs yields a high tide of inflation that floats all ships now headed for a recession.
Patrick Muri
Patrick Muri Jun 26, 2022 3:05PM ET
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very informative and quick, easy understanding read👍
Sabrina Giani
Sabrina Giani Jun 26, 2022 2:18PM ET
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Grazie x tutte queste informazioni preziose
Jun 26, 2022 2:02PM ET
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Hyperinflation coming
Imre Zsombor Varga
Imre Zsombor Varga Jun 26, 2022 11:48AM ET
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Either way I look at the g7 economy at its best. sp500 2023-24 8000 gl, USA gl EU
Kerry Ditto
Kerry Ditto Jun 26, 2022 11:35AM ET
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Good news is bad news. The healthy, good results of bank stress tests mean Fed is confident to go ahead with 75 bp or even 100 bp in July. Horrible to stock and bond markets.
Amit Vishwakarma
Amit Vishwakarma Jun 26, 2022 11:35AM ET
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means market down trade ??????
Trade Flow
Trade Flow Jun 26, 2022 11:35AM ET
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Yes, continuance of downtrend SP500
Brian Nine
Brian Nine Jun 26, 2022 10:31AM ET
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Red week?
Jay Garrelts
Jay Garrelts Jun 26, 2022 8:13AM ET
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I was reading about hackers Social Security numbers being stolen Technology failures then I said how about that bitcoin I should get in Profitable investment opportunity
 
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