Top 5 Things to Watch in Markets in the Week Ahead
By Noreen Burke
Investing.com -- The Federal Reserve meeting is the main event for markets in the week ahead and while the central bank is not expected to take any action investors will be on the lookout for signs that policymakers think inflation is becoming more permanent. While the outcome of the Fed meeting will take the limelight investors will also be looking closely at data on U.S. retail sales and producer prices for an update on the strength of the economic recovery. China is to publish data on industrial production and retail sales for May on Wednesday. In the UK, Prime Minister Boris Johnson will decide Monday whether to delay the full economic reopening planned for later this month. Here is what you need to know to start your week.
Fed meeting
Investors will be zeroing in on the Fed's statement at the conclusion of its two-day policy meeting on Wednesday against a background of persistent concerns over whether inflation spikes could pressure the central bank to start tapering its stimulus sooner than expected.
The Fed has repeatedly said that near-term price spikes will not translate into lasting inflation and Chairman Jerome Powell is expected to stick to this stance and reassure markets the Fed’s policy will remain accommodative.
While inflation numbers are rising the recovery in the labor market remain sluggish. The economy added 559,000 jobs last month after gains of just 278,000 in April. That left employment about 7.6 million jobs below its peak in February 2020.
Most analysts are not expecting the Fed to begin discussing scaling back its asset purchase program before its annual conference in Jackson Hole, Wyoming, in late August.
Economic data
Away from Fed meeting, the U.S. is to release May data on retail sales and producer price inflation on Tuesday.
Also out on Tuesday is industrial production data which will be closely watched amid issues over supply constraints and labor market shortages. This could translate into increases in producer price inflation.
The economic calendar also features reports on housing starts and initial jobless claims. Data on Thursday showed the number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly 15 months as the reopening continues.
Stock market torpor
Stock markets are likely to tread water, with investors reluctant to take new positions ahead of Wednesday’s Fed statement which will be scrutinized for clues regarding its timetable for raising interest rates.
Stocks on Thursday brushed off data showing that consumer prices rose in May at their fastest annual rate in 13 years, as the S&P 500 hit a new record. By contrast, a much higher-than-expected inflation number last month triggered a selloff.
Meme stocks could also remain in the headlines after a volatile ride last week. GameStop (NYSE:GME) hit a high of $344.66 Tuesday and dropped as low as $206.13 Friday before closing at $233.34 per share.
Besides meme stocks, Treasuries could also be in focus after an unexpected slide in yields. There was a major move in the rate of the benchmark 10-year, watched most closely by investors, as it influences mortgages and other important lending rates.
China data dump
China is set to publish May industrial production and retail sales data on Wednesday, giving investors an updated insight on the economic outlook for the world’s second-largest economy.
Both numbers are expected to slow from the previous month, as domestic consumption remains sluggish.
While China's exporters are enjoying strong demand, global supply chain bottlenecks and rising international commodity prices have weighed on production, acting as a drag on the strong recovery from last year’s pandemic induced slump.
China's economy expanded by a record 18.3% in the first quarter and many economists expect growth will surpass 8% this year.
UK to delay full reopening
British Prime Minister Boris Johnson is due to announce on Monday whether the lifting of England's last remaining lockdown curbs can go ahead on June 21.
But Johnson on Saturday expressed "serious concern" about rising infections of the Delta COVID-19 variant, first discovered in India, reinforcing expectations that he is set to delay a full reopening of the economy by two to four weeks.
Britain on Saturday reported 7,738 new COVID-19 cases, down slightly from a day earlier, when they were the highest since February.
The UK is to release data on inflation, unemployment and retail sales during the coming week, which are expected to point to an ongoing rebound in economic activity.
--Reuters contributed to this report
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