Investing.com -- It’s set to be a busy week in in markets with Friday’s U.S. jobs report, testimony by Federal Reserve Chairman Jerome Powell and a European Central Bank policy meeting the main highligts. Here’s what you need to know to start your week.
1. Nonfarm payrolls
Friday’s monthly jobs report will be keenly awaited with investors trying to gauge the timing of the first interest rate cut by the Federal Reserve, with bets currently targeting June amid hopes that the central bank can engineer a soft landing for the economy.
Signs of continued strength in the labor market could make it harder for investors to shrug off concerns about how a stronger-than-expected economy could reignite inflation if the Fed begins easing too soon.
Economists are expecting the economy to have added 190,000 jobs in February after January’s blowout 353,000 gain that was the largest in a year. The unemployment rate is expected to hold steady at 3.7%, while wage growth is expected to have moderated.
2. Powell testimony
Ahead of Friday’s jobs data, investors will get a chance to hear from Fed Chair Jerome Powell in his semiannual testimony on monetary policy before a House committee on Wednesday and a Senate panel on Thursday.
Powell is expected to reiterate that policymakers will stick to a cautious approach in deciding when to begin lowering interest rates given recent data pointing to strength in the economy and persistent price pressures.
Richmond Fed President Thomas Barkin said Friday it is too soon to predict when the central bank will be able to begin to cut its benchmark interest rate, as price pressures still exist in the U.S. economy.
3. Stock market rally
The Dow, the S&P 500 and the Nasdaq notched their fourth straight month of gains in February in a rally largely fueled by growth prospects related to AI, which has also lifted semiconductor names.
The S&P 500 and Nasdaq closed at record highs on Friday and the gains marked the second straight closing record for the Nasdaq, which also set an intraday record, surpassing its prior peak of 16,212.23 set in November 2021.
Markets have also been supported by indications that the economy remains resilient in the face of elevated interest rates.
"Because the economy is doing well and because inflation remains a bit sticky, the Fed will be slower to lower interest rates," Sam Stovall, chief investment strategist at CFRA Research in New York told Reuters.
"But that's good because then we're gradually coming off of the higher interest rate cycle and we're not in need of cutting rates aggressively."
4. ECB decision
The ECB is to meet on Thursday and no policy changes are expected, with investors instead waiting to see whether officials will repeat that it's too early to discuss rate cuts.
The ECB has pushed back on rate cut talk, with officials saying they need to see more evidence that inflation is on track to return to its 2% target, but markets are still expecting Frankfurt to begin cutting rates later this year with a first move expected in June.
Eurozone inflation data on Friday appeared to support the ECB’s cautious stance. Consumer price inflation slowed less than expected in February, while underlying inflation also moderated at a slower than expected pace.
The ECB's big worry is that wage inflation is still too high and risks stoking price pressures for longer.
5. Oil prices
Oil prices rose on Friday and posted weekly gains as traders awaited an OPEC+ decision on supply agreements for the second quarter while also weighing fresh U.S., European and Chinese economic data.
For the week, Brent added around 2.4% following the switch in contract months, while Crude Oil WTI Futures gained more than 4.5%.
A decision by the Organization of the Petroleum Exporting Countries on extending output cuts is expected during the coming week, according to reports, with individual countries expected to announce their decisions.
"The expectation that OPEC+ is going to continue with their voluntary production cuts well into the second quarter of 2024 is the main focus on the market," Andrew Lipow, president of Lipow Oil Associates told Reuters.
Geopolitical tensions in the Red Sea also look set to continue to underpin prices.
--Reuters contributed to this report