5 things to watch in the markets next week according to

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By Noreen Burke – After a week that saw financial markets rocking as central banks and governments ramped up their fight against inflation, investors should brace themselves for fresh volatility this week. next. Several Federal Reserve officials are about to speak, having delivered the third consecutive 75 basis point rate hike without any objections. The highlight of the US economic calendar will be data on personal income and spending on Friday, including the Fed’s favored inflation gauge. In the Eurozone, Friday’s inflation data is likely to weigh on the European Central Bank. Before that, ECB President Christine Lagarde will testify before lawmakers in Brussels on Monday, while the outcome of Sunday’s Italian elections will also be closely watched. The yen will remain the focus after the Bank of Japan intervenes in the foreign exchange market. Meanwhile, Friday’s China PMI data will provide insight into the health of the world’s number two economy. Here’s what you need to know to start your week off.

  1. Fedspeak, US data

Fed President St. Louis James, Cleveland Fed President Loretta, Chicago Fed Director Charles Evans, Atlanta Fed President Raphael Bostic and Fed Vice President Lael will all speak this week, with investors wary for signs of a second. 75 bps consecutive quarter is on the card in November.

The economic calendar has reports on, along with data on and.

The highlight of the economic calendar will be August data on and on Friday, including the personal consumption expenditures price index, the Fed’s preferred inflation gauge.

Economists are expecting moderate year-over-year gains due to the recent drop in fuel costs, but costs excluding food and energy are expected to increase.

  1. Selling off stocks

Wall Street’s main indexes suffered heavy losses last week with a 5.03% drop – the second straight week down more than 5% – while ending the session down 4.77% and down 4%.

The Dow avoided joining the S&P 500 and Nasdaq in a bear market.

The shift in the bond market has added pressure to equities as investors readjust their portfolios amid persistent inflation and rising interest rates. Investors were caught off guard after they expected high US rates to last through 2023.

While recent data has shown that the US economy remains relatively strong, investors fear the Fed’s tightening will push the economy into recession. Depression.

“We’re asking people to reassess exactly how far the Fed is going and that’s hurting the economy,” Ed Moya, senior market analyst at OANDA, told Reuters on Friday. .

“It’s becoming the base situation that this economy is going to land hard, and that’s a bad environment for US stocks.”

In addition to tightening financial conditions worldwide, market sentiment has been hit hard by a host of other issues including the Ukraine conflict, the energy crisis in Europe and the COVID-19 outbreak- 19 of China.

  1. Eurozone CPI

The eurozone is due to release September data on Friday with economists expecting the inflation rate to rise to a new record high of 9.6%, putting pressure on the ECB as it struggles with how much to raise interest rates in the face of a looming recession.

Before that, ECB President Christine Lagarde will testify before the Economic and Monetary Commission in Brussels on Monday, where she will likely face questions about how the central bank plans to navigate the crisis. inflation as the bloc faces the prospect of a recession.

Investors will also be watching Sunday’s results, which are expected to lead to the formation of the country’s most right-wing government since World War II.

European Union leaders, keen to maintain unity after Russia’s invasion of Ukraine, fear that Italy will be a more unpredictable partner, while financial markets will worry about their own ability New government in managing debt amounting to about 150% of GDP.

  1. Yen intervention

The Japanese authorities were finally confronted with a weakening of the yen on Thursday when they were for the first time since 1998.

The coin posted its first weekly gain of 0.3% in over a month against the dollar following the move.

However, the dollar is up more than 20% against the yen this year with the Bank of Japan sticking to its pledge of ultra-low interest rates, while the Fed looks set to keep raising rates aggressively until the end of the year. when inflation is under control.

So the case for a strong dollar remains. Japan, along with its neighbors China and South Korea that are also pushing back against the dollar, could find themselves going against fundamentals, the market and the Fed.

will give a speech on Monday, where he is expected to provide more details on Japan’s decision to intervene.

  1. China PMI

China will release data on Friday, which will be watched closely for signs of whether the nascent economic recovery continues into September.

Recent economic data suggest resilience in August, with faster-than-expected growth in factory output and retail sales helping a fragile recovery, but a deepening decline in Real estate has weighed on the outlook.

With few signs China will soon significantly ease its zero-COVID policy, some analysts expect the world’s second-largest economy to grow just 3% this year, the slowest pace since 1976. , except for the 2.2% expansion in the initial COVID wave achieved in 2020. .

China has announced a series of economic support measures since the end of May but the rapid depreciation against the US dollar complicates the case for more easing monetary support.

–Reuters contributed to this report

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