Weekly Markets Outlook: Fed Rate Hikes, Media & Consumer Earnings, RBI & BOE Updates
The economic calendar is likely to be much calmer this week, but investors will still have much to think about in the wake of the Federal Reserve’s rate hike from last week and Friday’s surprisingly high U.S. nonfarm payrolls report.
The focus of the ongoing earnings season is on media and consumer stocks. The Reserve Bank of Australia is expected to increase rates once more, while statistics from the U.K. and the Eurozone will be extensively scrutinised. This information will help you get your week started.
Markets will be eagerly following Fed Chair Jerome Powell’s presentation on Tuesday after Friday’s massive U.S. jobs report caused investors to reevaluate their assumptions regarding how hawkish the Fed may need to be in its efforts to control inflation.
According to data released by the Labor Department on Friday, the economy created 517,000 more jobs in January than was predicted.
Powell acknowledged progress against inflation last week, but the unexpectedly robust jobs statistics may give the central bank more room to continue raising rates.
Investors worry that the economy may enter a recession as a result of the Fed’s rapid rate hikes.
Initial jobless claims data on Thursday will provide an update on the labour market, and many other Fed officials, including New York Fed President John Williams, Minneapolis Fed President Neel Kashkari, and Atlanta Fed President Raphael Bostic, are slated to speak.
The earnings season continues, with media and consumer stocks taking turns in the forefront.
On Wednesday and Thursday, the New York Times (NYSE:NYT), Walt Disney (NYSE:DIS), which is involved in a proxy fight over board representation, and News Corp (NASDAQ:NWSA), which abandoned a plan to merge with Fox Corp, will all release earnings reports.
On Thursday, PepsiCo (NASDAQ:PEP) and Kellogg (NYSE:K) will report earnings, providing a window into how customers are coping with inflation. In the upcoming week, results are anticipated from more than 90 S&P 500 businesses.
S&P 500 earnings are expected to have decreased 2.4% in the fourth quarter compared to a year ago after 190 companies have reported, a greater dip than the 1.6% drop projected on January 1.
The Reserve Bank of Australia is expected to increase interest rates by another quarter point on Tuesday, according to the markets. This is because last quarter’s inflation rose to its highest level in 33 years despite the RBA’s aggressive tightening drive.
Other economic figures that surprised in the opposite direction included the largest decline in retail sales since the pandemic and the largest decline in home values since at least 1980.
The future for the Australian dollar is bright: as long as China’s reopening proceeds as planned, the currency should increase.
The Reserve Bank of India’s battle against inflation may be ended, though, as economists anticipate another 25 basis point rate increase on Wednesday, followed by a respite.
After raising rates by 50 basis points last Thursday and all but promising more of the same in March, the ECB’s officials’ comments will be extensively scrutinised.
High core inflation was noted by ECB President Christine Lagarde as the reason why “we have more territory to cover and we are not done.”
Along with Germany’s central bank President Joachim Nagel, ECB Vice President Luis de Guindos and Executive Board member Isabel Schnabel are scheduled to appear in public in the upcoming days.
Data on January’s inflation in Germany will be released on Thursday, having been postponed from last week. Economists anticipate an acceleration.
Prior to that, Germany is scheduled to publish information regarding factory orders on Monday and a report regarding industrial production on Tuesday.
On Friday, the U.K. will announce data on its gross domestic product, which is anticipated to reveal that the country’s economy stagnated in the fourth quarter, narrowly averting a recession.
The Bank of England stated last week that although the UK is still on track for a recession this year, it is likely to be “far milder” than initially anticipated, mostly as a result of lower energy costs and weaker market interest rate expectations.
Last Thursday, the BOE raised rates for the ninth consecutive meeting, but said that the struggle against inflation was winning.
Since Russia invaded Ukraine, the energy issue has had a significant negative impact on Britain’s economy. In the wake of Brexit, it has also experienced a decline in the size of its workforce, low company investment, and lacklustre productivity development.