By Noreen Burke
Investing.com – Stock markets rocked last week after the Federal Reserve delivered a general expected half a percentage point and indicated similar moves in upcoming meetings as it struggles to curb rising inflation, and higher volatility could be expected if data arrives on inflation on Wednesday warmer than expected. Investors will also focus on speeches by several Fed officials during the week. China will release data on trade and inflation that will be closely monitored, while GDP data from the UK is likely to point to a slowdown in growth. Energy prices will also remain in focus due to the threatening EU embargo on Russian oil. Here’s what you need to know to start the week.
- US inflation data
Wednesday’s April CPI data will show whether the fastest rise in inflation in 40 years has peaked. The annual inflation rate in March was 8.5 percent, as gasoline costs reached record highs.
Economists predict an annual rate of, but a reading higher than expected could potentially underscore the reasons for an even more aggressive tightening of monetary policy by the Fed.
Investors fear that aggressive tightening by the Fed could bring the economy into recession.
The coming week will also feature a series of speeches by Fed policymakers, including Fed President Atlanta Raphael, Fed President New York John, Fed Governor Christopher, Fed President Minneapolis Neel, Fed President Cleveland Loretta and Fed President San Francisco Mary.
- Increased volatility
The and announced their fifth consecutive week of falls last week, and the sixth. It was the longest string of losses for the S&P 500 since mid-2011 and for the Nasdaq since late 2012.
“The market is focused on the Fed being behind the curve and that’s why the market is falling,” Keith Lerner, chief market strategist and co-investment leader at Truist Advisory Services, told Reuters.
Markets at the Fed session in June set the price at approximately 75 percent since the rate increase of 75 basis points, despite Fed chairman Jerome Powell dismissing it last Wednesday.
Market volatility seems set to continue as the Fed’s combination of more hawks, bond yield increases and geopolitical risks like the war in Ukraine strains investor sentiment.
- Data on China
China will release trade and inflation data on Monday that will show the impact of Covida-19 isolation on the world’s second-largest economy.
Economists expect trade data to show that growth has fallen to its lowest level since mid-2020 in April, while it is expected to decline in the second month as domestic demand is hit by austerity measures in Shanghai and elsewhere.
The data is expected to show that the shortage of goods has boosted prices, while inflation in the factory is expected to remain at elevated levels.
Shanghai faces challenges to accelerate factories, many of which are key links in global supply chains, even as much of the 25-million-strong city remains closed.
- Eurozone data, UK
The latest data on the German mood index ZEW and preliminary data from the first quarter of the UK will highlight the dilemma faced by central banks as they try to fight rising prices amid heightened concerns about the prospects for growth.
Economists expect the index to fall again from its lowest level since the start of the 2020 pandemic in April.
The UK economy is expected to grow by 1% in the first quarter, but the monthly reading for March is expected to be uniform.
Last week, the Bank of England warned that Britain risks a double whammy of recession and inflation above 10 per cent as it rose to 1 per cent, the most since 2009.
Several European Central Bank officials are due to speak during the coming week, including President Christine on Wednesday.
- Energy prices
The European Union is close to agreeing on a new round of sanctions against Moscow over the invasion of Ukraine, including a gradual embargo on Russian oil, which accounts for more than a quarter of EU imports.
The move will push European refineries in the race to find new suppliers of crude oil and leave drivers with higher bills at the pump at a time when the cost of living crisis is pushing consumers globally.
The upcoming ban led to a price increase of about 5% last week, while it rose by almost 4% as the prospect of supply cuts eased concerns about the outlook for the global economy.
“In the short term, the foundations for oil are bullish and only the fear of an economic slowdown in the future is holding us back,” Phil Flynn, an analyst at Price Futures Group, told Reuters.
– Reuters contributed to this report