Markets Brace for Turbulence: What to Expect in the Week Ahead
Inflation, Interest Rates, Earnings, Geopolitics: The Key Drivers
The week ahead is likely to be a volatile one, with investors focused on a number of key events. Here are five things to watch:
U.S. inflation data: The U.S. Bureau of Labor Statistics will release its latest inflation data on Tuesday. Economists are expecting inflation to have accelerated in May, which could put pressure on the Federal Reserve to raise interest rates more aggressively.
“Inflation is our top concern,” said Federal Reserve Chair Jerome Powell. “We will take the necessary steps to bring inflation back down.”
ECB meeting: The European Central Bank will meet on Thursday and is expected to announce a new plan to combat rising inflation. The ECB is under pressure to raise interest rates, but it is also concerned about the impact of higher rates on the region’s fragile economy.
“The ECB is facing a difficult balancing act,” said economist David Bloom. “It needs to raise interest rates to combat inflation, but it also needs to be careful not to raise rates too quickly and choke off growth.”
China economic data: China will release a number of key economic data on Wednesday, including GDP growth, industrial production, and retail sales. The data is expected to show that the Chinese economy is slowing down, which could have a negative impact on global growth.
“The Chinese economy is slowing down,” said economist Nomura’s Zhang Zhiwei. “This is a major risk to global growth.”
U.S. earnings season: The second quarter earnings season will get underway on Wednesday, with major banks reporting their results. Investors will be looking for signs of how companies are faring in the face of rising inflation and interest rates.
“The U.S. earnings season will be closely watched,” said Bank of America’s Michael Hartnett. “Any signs of weakness in earnings could weigh on markets.”
Geopolitical risks: The war in Ukraine and the ongoing tensions between the U.S. and China are likely to continue to weigh on markets. Investors will be watching for any developments that could escalate these conflicts.
“The war in Ukraine and the tensions between the U.S. and China are major geopolitical risks,” said Goldman Sachs’ David Kostin. “Investors will be watching for any developments that could escalate these conflicts.”
