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Top 5 things to watch in markets in the week ahead

Published 05/14/2023, 06:38 AM
Updated 05/14/2023, 07:06 AM
© Reuters

Investing.com -- Investors will be holding out for an update on plans to raise the U.S. debt ceiling this week, while remarks by Federal Reserve policymakers will be parsed for insights on the future path of interest rates. Equity markets are likely to remain in the doldrums while data out of the Eurozone, U.K. and China will offer more insight into the strength of the global economic outlook.

  1. Fed speakers and data

With investors worried that the Fed’s aggressive rate hikes could tip the economy into recession, appearances by several central bank officials in the coming days will be closely watched.

Fed Vice Chair for Supervision Michael Barr is to testify before Congress on recent banking sector stresses and the central bank’s response. On Friday, Fed Chair Jerome Powell and former Fed head Ben Bernanke are to participate in a panel discussion on monetary policy in Washington.

Other Fed officials scheduled to make appearances during the week include New York Fed President John Williams, Cleveland Fed Governor Loretta Mester, Minneapolis Fed President Neel Kashkari and governors Philip Jefferson and Michelle Bowman.

Bowman said Friday that the Fed will probably need to raise rates again if inflation stays high.

The U.S. is also to release April data on retail sales and industrial production on Tuesday, with retail sales expected to rebound. The weekly report on initial jobless claims is due out on Thursday.

  1. Debt ceiling worries

Worries over a potential U.S. default as early as June 1st are weighing on investors, amid a stalemate in Congress over raising the borrowing limit.

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The Congressional Budget Office warned Friday the U.S. faces a "significant risk" of defaulting within the first two weeks of June if lawmakers fail to increase the amount of debt the country is legally allowed to take on.

Talks between U.S. President Joe Biden and top lawmakers on raising the $31.4 trillion debt ceiling are due to resume early this week, after a planned meeting on Friday was postponed to allow staff to continue negotiations.

Republicans are insisting on drastic spending cuts in exchange for raising the debt ceiling, while Democrats are insisting the debt ceiling is not an appropriate vehicle to make budget changes.

The International Monetary Fund has warned that a U.S. default would have “very serious repercussions” for the U.S. economy as well as the global economy, including likely higher interest rates.

  1. Stock markets

U.S. stock markets ended last week broadly lower with the Dow Jones Industrial Average down 1.1%, the S&P 500 sliding 0.3% and the Nasdaq gaining 0.4% as a combination of concerns over the debt ceiling impasse and monetary policy weighed.

Data on Friday showing a steeper-than-expected drop in U.S. consumer sentiment added to worries that political haggling over raising the debt ceiling could trigger a recession.

Meanwhile, comments by Fed officials on Friday (see above) added to uncertainty over whether the central bank will pause rate hikes next month as had been widely expected.

Earlier this month the Fed indicated it may pause further rate hikes as it assesses the impact of its past tightening, as well as the effect of recent bank sector stress on lending and credit.

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Earnings season continues in the week ahead with results due from companies including Walmart (NYSE:WMT), Home Depot (NYSE:HD) and Cisco Systems (NASDAQ:CSCO).

  1. Eurozone/UK data

The Eurozone is to release revised data on first quarter GDP data on Tuesday with economists expecting the bloc's economy to have expanded by just 0.1% in the three months to March. Some economists say stagnation has continued and could result in a recession later this year.

The more forward-looking ZEW Institute surveys of business conditions and sentiment in the region’s largest economy Germany are to be released the same day.

Meanwhile, in the U.K. the wage component data of Tuesday’s jobs report will be closely watched as inflation remains in double digits. The Bank of England has indicated that the decision on whether to hike rates again at its June meeting will hinge on the wage and inflation data out before then.

  1. China data

China is to release a flurry of economic data on Tuesday, including reports on retail sales, industrial production and fixed asset investment. Economists are expecting retail sales and industrial production to have accelerated at a rapid annual rate, while fixed asset investment is also expected to pick up significantly.

But the monthly comparison may offer a more accurate comparison as China’s economy was still under strict COVID lockdowns during the same period last year.

Economic data out of China last week indicated that the world’s second-largest economy is struggling to gain momentum amid an uneven recovery after pandemic restrictions were lifted, adding to doubts over how much it can contribute to growth in the global economy this year.

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--Reuters contributed to this report

Latest comments

We are in a recession already. Debt ceiling talks can't tip you into something you are already in. You already fell in the pond.
Worried for too many war actions in progress everywere.
russias war of aggression causing worldwide inflation, making everyday living expenses very difficult to manage
Inflation started in December 2020, thanks to big monetary expansion of free money that was supposed to counter idiotic worldwide COVID mandates that resulted in huge production drops. Less goods for which more money competed = inflation. Clearly that is something you know nothing you would know about. On top of that damaging energy policies by EU and USA with focus on expensive "green" sources. Just one example, Germany closed it's thermal power plants and nuclear power plants... for sure did not help to reduce cost of energy. Then came the war and just speed up the process that was already put in place. However from perspective of those that really govern the world, everything is going according to the plan, because this happening was the plan.
Inflation started the day Biden cut the oil supplies.
more rightwing r(etard) drivel, endlessly repeating your factfree nonsense propaganda that somehow, as by magic, inflation started the day Biden took office...
Biden policies making everyday living exspenses very difficult to manage
Thumbs down people… are obviously bots.
Who are the UStates borrowing money from? China?
Japan
Anyone want a Bud Light?
LOL
Credit card data indicates big drop in spending as upper income wages tumble and Unemployment Benefits soar...I'm sure its nothing we have the Debt ceiling drama to deal with!!
Delusional
delusional? credit card debt at ATH. Personal debt, ATH. 60+% living from paycheck to paycheck. You're the delusional one
I think he was talking to himself
Talking about “US default”, this will drag on for a while as usual, without having any tangible link to the market. However, the media will project this link in every article, knowing well that many folks are thoroughly brainwashed and will swallow anything delivered by the media. This process will produce buying opportunities.
Too bad im not smart enough to realize that is exactly why Sleepy Joe can never get things done. He has been start of the swamp since the Pyramids were built. Heck ...he IS the swamp.
 Dream on. This thing has never been done in advance. It will be done at the last hour, after 2-3 “deadlines” missed.
Check back with is tomorrow.
Republicans are not getting drastic spending cuts. They barely have a majority and if they even actually caused a default over spending thats already been approved by the democratically elected congress they will be finished as a party for a long time
Whats to high. How much does Bowman expect inflation to fall in 30 days. She's wreckless and only wants to cause uncertainty. If they think inflation is to high they should not be talking about pausing in the first place.
Tell Bowman to toe the line. No more hiking without knowing how much credit tightening is taking place. They get walked into questions anyway. You expect her to say No, no more hiking no matter what?
Most people don’t care about the haggling over the debt ceiling since it does not make sense when one can set their own limits. The only fear is being driven by media needing a story.
The media reports what Wall Street talks about incessantly. It's a self-fulfilling prophecy, really.
People definitely care. The market is extremely sensitive and easily spooked
The problem is its always spun so when they raise the debt ceiling (which they always do) its good for 1000 point gain in the markets. Bogus
AI is in the stock market
market seems to crash drastically
this is useless , pointless info. was is AI GENERATED .??
This is NOT an AI-generated story. Rather, it's a context-driven layout of the week ahead calendar. If you want stock tips, go elsewhere.
The Republican Congress has already voted yes to increase the debt ceiling.  I do not know where the publisher of this article is getting their information from.  There is no more fighting in the House of Representatives.  It is the Democrat Senate and the Democrat President that refuse to advance the already approved US House of Representative vote to increase the debt ceiling.  The people have spoken and the last time I checked, the House of Representatives under the US Constitution controls the spending.
"The House on Wednesday narrowly passed Republicans' bill to raise the debt ceiling while cutting spending and unraveling major elements of President Biden's domestic agenda, in a G.O.P. bid to force Mr. Biden to negotiate over spending reductions or risk a catastrophic debt default." The New York Times reported that on April 26. And you're holding to that? You mean the GOP rubber stamping a motion by its own makes a deal for you? What the Democrats say doesn't matter in this so-called arrangement, I guess, because in your words, "the House controls spending". The reality is neither side is budging much from its well-entrenched position. And you consider that as done? Wow.
This is more like the real deal (reported by the Financial Times on May 13): The shape of a possible US debt ceiling agreement between the White House and Republicans in Congress is emerging as they intensify talks in a bid to avoid an unprecedented national default. People familiar with the matter said that the issues on the table in the talks had narrowed, as senior Biden administration officials and aides to Republican Speaker of the House Kevin McCarthy prepare to hold new discussions this weekend.
The US Congress already voted yes to raise the debt ceiling.  I do not know where this person is getting their information from.  It is the Democrat Senate and Democrat President that have not advanced that completed yes vote in the Republican lead Congress.
In total, nothing new should be expected next week. The market will stay chaotic.
In a sentence, yes. But it's not because of our reporting, which is actually a context-driven layout of what's happened and what could unfold next, calendar-wise.
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