Lending markets

Top 5 Things to Watch in the Markets in the Week Ahead By Investing.com

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By Noreen Burke

Investing.com — Thursday’s latest U.S. inflation numbers will be eagerly awaited by investors who have repeatedly seen their hopes dashed of a pivot away from an aggressive rate hike campaign by the Federal Reserve. Wednesday’s minutes from the Fed’s latest meeting should provide some insight into how officials view the economy and the outlook for inflation. Comments from several Fed policymakers during the week will also be closely watched. Big bank earnings on Friday are expected to show the impact of rising interest rates and market volatility. Oil prices will remain in the spotlight after OPEC+ announced its biggest supply cut since 2020 and in the UK a barrage of economic data will test the pound’s recovery. Here’s what you need to know to start your week.

  1. Inflation figures in the United States

Another high inflation reading on Thursday would underscore the case of even more hawkishness from the Fed after Friday’s jobs report indicated that the labor market remains robust despite Fed efforts to reduce high inflation by weakening growth.

As economists expect the key rate to moderate, , which excludes food and fuel costs, is expected to accelerate in September, keeping the Fed on track for a fourth consecutive month of 75 basis points. basis in November.

data on Friday is expected to show a modest increase for September as auto sales rebounded.

The economic calendar also contains data that should show how U.S. consumers are faring after months of tighter monetary policy, as well as data on wholesale price inflation.

  1. Fed report, speakers

Wednesday’s latest Fed meeting will provide more insight into policymakers’ views on the inflation picture and the outlook for future interest rate developments.

Investors will also be able to hear from several Fed officials during the week, including Vice Chairman Lael Brainard, New York Fed President James, Cleveland Fed President Loretta and Chicago Fed Chief Charles.

Recent comments from Fed officials have indicated that turmoil in financial markets will not deter them from acting to reduce inflation, which the central bank’s preferred measure is more than three times higher than its target. .

Stock markets were hit hard by fears that aggressive monetary tightening by the Fed could tip the economy into recession.

  1. The profits of the big banks

Big U.S. banks are due to kick off quarterly corporate earnings on Friday amid concerns about the impact of rising interest rates. Four of the nation’s largest lenders – JPMorgan Chase (NYSE:), Wells Fargo (NYSE:), Citigroup (NYSE:), and Morgan Stanley (NYSE:) – are expected to release their third quarter results before Friday’s open.

Analysts expect results to show lower net income after market volatility hit investment banking activity and lenders set aside more funds for rainy days to cover losses from borrowers who fall behind in their payments.

Banks generally earn more when interest rates rise because they can charge customers more to borrow, but higher borrowing costs also impact demand for mortgages and other loans.

“We expect a moderate, but growing, negative impact on banks’ asset quality and loan growth from higher rates, inflation and a mild recession in the United States, reversing some of the benefits of rising rates,” Fitch Ratings analysts wrote in a statement. report.

  1. Oil prices

prices are expected to remain in the spotlight after hitting five-week highs on Friday, despite the dollar strengthening, following OPEC+’s decision to cut oil production amid strong US pressure to keep global oil prices low .

The Organization of the Petroleum Exporting Countries and its allies, including Russia, known as OPEC+, plan to cut their production target by 2 million barrels a day ahead of a European Union embargo on Russian oil , which will put pressure on supply in an already tight market.

“One of the major ramifications of the latest OPEC cut is a likely $100 oil return,” Stephen Brennock of oil broker PVM told Reuters.

UBS Global Wealth Management also expects to “exceed the $100 per barrel mark in the coming quarters.”

US Treasury Secretary Janet Yellen said the decision was “unnecessary and reckless” for the global economy, especially emerging markets, in an interview published in the Financial Times on Sunday.

5. UK data

The Bank of England’s Financial Policy Committee is due to publish on Wednesday. The committee oversaw last month’s emergency intervention to stabilize bond markets after the government’s mini-budget, and the minutes can provide insight into the risks facing pension funds and the implications of the sharp rising mortgage rates.

The UK is due to release August on Tuesday, followed a day later by August figures as well as industrial production and trade balance data.

Weak economic data could increase pressure on the government to implement longer-term growth plans.

Investors are betting on the BoE raising interest rates by one percentage point at its next meeting in November to tackle an inflation rate that is currently hovering around 10%. The tax cuts planned by the new government are expected to fuel inflation.

–Reuters contributed to this report