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Top 5 Things to Watch in Markets in the Week Ahead

Published 09/04/2022, 06:30 AM
Updated 09/04/2022, 06:39 AM
© Reuters

By Noreen Burke

Investing.com -- The escalating energy row between Moscow and the West is set to occupy investors’ attention in the week ahead after Moscow vowed to keep its main gas pipeline to Germany shut. The European Central Bank is set to deliver a big rate hike to combat soaring inflation. Federal Reserve Chair Jerome Powell is due to make an appearance before the central bank goes into its blackout period before its next meeting. Stocks will likely remain volatile as traders return after the Labor Day holiday and OPEC+ is meeting Monday to discuss cutting output to support oil prices. Here's what you need to know to start your week.

1. Energy row

The standoff over Russian gas and oil exports escalated Friday after Moscow vowed to keep its main gas supply pipeline to Germany shuttered and G7 countries announced a planned price cap on Russian oil exports aimed at hitting Russian resources to fight the war in Ukraine.

The latest Nord Stream pipeline shutdown, which Russia says will last for as long as it takes to carry out repairs, added to fears of winter gas shortages that could pull major economies into recession and lead to energy rationing.

Europe has accused Russia of weaponizing energy supplies in what Moscow has called an "economic war" with the West in the wake of Russia's invasion of Ukraine. Moscow blames Western sanctions and technical issues for supply disruptions.

The European Commission has warned that a full cut-off of Russian gas supplies to Europe, if combined with a cold winter, could reduce GDP across the European Union by as much as 1.5% if countries did not prepare in advance.

2. ECB rate hike

The ECB looks set to deliver a second large rate hike at its upcoming meeting on Thursday with inflation in the Eurozone, already at record highs, rapidly approaching double digits.

Eurozone inflation hit a high of 9.1% in August, well above the ECB’s 2% target as soaring energy bills exacerbate a cost-of-living crisis.

The only question for investors is whether the central bank will deliver another 50-basis-point hike, as it did in July, or opt for an even bigger 75-basis-point increase, despite the looming prospect of a recession this winter.

In a recent speech, ECB board member Isabel Schnabel urged central banks to act forcefully to curb inflation, even if that drags their economies into a recession.

3. Fedspeak

Fed Chair Jerome Powell is to speak at a Cato Institute conference on Thursday and investors will be on the lookout for any indications that the Fed is leaning towards another 75-basis-point rate hike at its September 20-21 meeting or whether a 50-basis-point hike may be on the cards.

Friday's employment report for August was a mixed bag - while the economy added more jobs than expected, wage growth moderated and the unemployment rate ticked higher, keeping alive the debate over the size of the next Fed hike.

Expectations for aggressive Fed action have solidified since a hawkish speech by Powell at the Fed’s Jackson Hole conference last month.

The economic calendar is light, but the Institute for Supply Management publishes its August services PMI on Tuesday, with economists expecting a reading of 55.5.

4. Stock market volatility

U.S. stocks ended the week lower on Friday as early gains on the back of the nonfarm payrolls report were overshadowed by worries about the European energy crisis.

An uptick in the U.S. unemployment rate eased concerns over the prospect of aggressive Fed rate hikes, but markets erased gains on news of the latest Nord Stream pipeline shutdown.

All three main indexes posted their third straight weekly loss, with the Dow down 2.99%, the S&P 500 falling 3.29% and the Nasdaq shedding 4.21%.

A summer rally in stock markets has taken a hit since Powell’s hawkish-sounding speech at Jackson Hole, where he warned that the Fed’s fight against inflation could result in economic pain.

Volatility looks set to remain elevated when traders return after the long Labor Day weekend on Tuesday, with investors shifting their attention to U.S. inflation data due mid-month, the final piece of major economic data before the Fed’s September meeting.

5. OPEC+ meeting

The Organization of the Petroleum Exporting Countries and allies, including Russia, is due to meet on Monday and energy traders will be paying close attention after Saudi Arabia recently raised the possibility of production cuts.

Surging energy costs this year have plagued global economies as Russia's invasion of Ukraine exacerbated supply concerns.

Oil prices have eased over the summer amid uncertainty over the demand outlook from China's COVID-19 curbs and as central banks around the world hiked interest rates to combat soaring inflation, weighing on the global economic outlook.

OPEC+ last week revised market balances for this year and now sees demand lagging supply by 400,000 barrels per day, against 900,000 bpd forecast previously. The producer group expects a market deficit of 300,000 bpd in its base case for 2023.

--Reuters contributed to this report

 

Latest comments

the balance in energy will be find no one wants catastrof
I do not think OPEC+ members deserve respect or behave in a friendly manner towards the little guys of the world much less do they show any form of intelligent, decent or simply right behaviour. They know exactly that inflation sooner or later will ******* up the whole planet. Nonetheless rampant greed leads them to do everything to keep prices skyhigh with Russia no exception. If they were up to be doing something useful for the world the oil price were at least half of what it is now and it were not denominated in dollars but in euros
This war isn't between Ukrine and Russia. This war is beween USA and Russia! Europe is almost like a USA's puppet. Moreover, Europe will be the victim of the USA's police because of the EU unfortunately has a noodle and hypocrite laders!
Biden could end all of that by opening up US shale and fracking oil production and denying Ukraine a membership to a club. But, no! Ukraine's membership in a club is worth more than all western civilization. That's Bidens plan for a great America.
A club. Grow up.
Thanks for this remarkable information.
Thank you for sharing the article 💯
Nordstrom 1 is closed indefinitely and not for repairs as stated here
Russia establishes more channels to sell gas to China, India, Turkey etc. and so it is less interested to sell directly to Europe. The latter plays helpful, for Russia and other producers, role of setting ultra-high price for global gas market.
Oil $150+ by end of year
Why do you think so?
3700 in the table
good summary!
All these fear cries, lol. I know what time it is. New highs by the end of October incoming 💯
Huge decline in stocks coming soon. Sell all your stocks or go broke!
If ECB has guts to go 75, then USD drops, allowing recovery in commodity prices.
You have a lot of uninformed opinions. Higher interest rates make the dollar stronger, which means lower commodity prices - the exact opposite of your monumentally ignorant comment.
 Obvious, you have no idea what ECB stands for. It means European Central Bank and it sets rates in Europe, not in US. Higher rate in Europe would make euro stronger and dollar weaker. Understood? You better learn basics before trying to attack other posters on these boards.
You are right. I misread that.
How can "markets erase gains on news of the latest Nord Stream pipeline shutdown" but NG doesn't?
That's okay if they cut they will face price caps. About time the g7 formed a buyers cartel to fight this extortion
jared kushner was given 2 billion from the Saudis! what did they get in return? are they our friends? they dont act like it! do the Republicans care? not if the crime is committed by one of them!
This is what passes for reason among the American right wing know-nothings.
We are not a loser? Homeschooled?
The 2 billion was for looking the other way after the kashoge *******
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