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Top 5 things to watch in markets in the week ahead

Published 01/14/2024, 06:27 AM
© Reuters
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Investing.com -- Retail sales data and bank earnings will be the highlight of a holiday shortened week as markets await more insights on the health of U.S. consumers. Global leaders gather in Davos, China is to release full year GDP figures and oil prices look set to remain volatile. Here’s what you need to know to start your week.

  1. U.S. retail sales

Wednesday’s U.S retail sales data will be closely watched for indications that consumer spending - a major driver of economic growth - is remaining resilient in the face of elevated interest rates.

The Federal Reserve hiked rates last year in a bid to tame inflation. But with price increases slowing, the potential pace of interest rate cuts this year, and whether the economy will avoid a recession, are the key questions hanging over markets.

Retail sales are expected to have risen 0.4% in December, after a 0.3% increase in November.

Data on housing starts and existing home sales are expected to point to a housing market that’s still struggling in the face of higher borrowing costs.

Investors will also have the chance to hear from several Fed officials including Fed Governor Christoper Waller as well as Atlanta Fed President Raphael Bostic and San Francisco Fed head Mary Daly.

  1. Bank earnings

Bank earnings are set to continue with Goldman Sachs (NYSE:GS) and Charles Schwab (NYSE:SCHW) due to report on Tuesday and Wednesday respectively, after a mixed bag of earnings from big lenders on Friday.

Major U.S. banks reported lower profits in a choppy fourth quarter clouded by special charges and job cuts, with signs an income boost from high interest rates is waning and some consumer loans are starting to sour.

Still, the country's largest lenders JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC), Bank of America (NYSE:BAC), and Citigroup (NYSE:C) struck an upbeat tone on the economy, noting that consumers remained resilient even as defaults on consumer loans began returning to pre-pandemic levels.

Jamie Dimon, CEO of JPMorgan Chase, the biggest U.S. bank and a bellwether for the economy, said consumers were still spending and that the markets were expecting a soft landing, but warned government spending could continue to push prices higher.

  1. Davos

The 54th annual World Economic Forum titled “Rebuilding Trust,” gets underway on Monday in the Swiss ski resort of Davos.

Political figures, central bankers and business leaders will discuss a challenging global economic outlook, with wars in Ukraine and Gaza, trade concerns and rising debt levels all on the agenda.

China’s Premier Li Qiang and French President Emmanuel Macron, the only G7 leader attending Davos, are both due to give special addresses.

European Central Bank President Christine Lagarde is scheduled to make three appearances. International Monetary Fund Managing Director Kristalina Georgieva, World Bank President Ajay S. Banga, and World Trade Organization Director-General Ngozi Okonjo-Iweala will also be in attendance.

  1. China GDP

China is to release full-year GDP figures on Wednesday which will show how close the world’s second-largest economy got to realizing the official 5% growth target for 2023.

A protracted property crisis, cautious consumers and geopolitical challenges are also pointing to another bumpy year ahead for China’s economy.

Elsewhere, Germany is to release full year GDP data on Monday which could show that the Eurozone’s largest economy suffered a shallow recession in 2023.

The UK is to release what will be closely watched inflation data on Wednesday, a day after the latest employment data. Underlying inflation is expected to remain well above the Bank of England’s 2% target.

The BoE has said it plans to keep interest rates high "for an extended period" to ensure the surge in inflation does not cause long-term problems in the economy, but investors are betting on a first rate cut as soon as May.

  1. Oil prices

Oil prices look set to remain volatile in the week ahead after rising 1% on Friday as an increasing number of oil tankers diverted course from the Red Sea following strikes by the U.S. and Britain on Houthi targets in Yemen after attacks on shipping by the Iran-backed group.

For the week, Brent was down 0.5% and U.S. crude 1.1% lower. Earlier in the week, sharp price cuts by top exporter Saudi Arabia and a surprise build in U.S. crude stockpiles spurred supply worries.

Although the lack of shipping through the Red Sea... does create transportation issues for some crude supplies, the impact on the physical oil markets is, thus far, minimal," Matt Stephani, president at investment advisory firm Cavanal Hill Investment Management told Reuters.

"If the conflict were to spread to the other side of the Arabian peninsula... oil markets may react much more significantly," Stephani added.

--Reuters contributed to this report

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