US inflation data for September this week will be keenly awaited after Friday’s stronger-than-expected jobs report reassured investors worried the economy was weakening. The Federal Reserve is set to release its September meeting minutes, earnings season is underway and oil prices look set to remain volatile amid heightened geopolitical tensions. Here’s your look at what’s happening in the markets for the week ahead.
US CPI
Thursday’s September inflation data is expected to show that price pressures continued to ease at the end of the third quarter. The data, which comes after Friday’s strong jobs report, is likely to shape expectations about the size and pace of Fed rate cuts in coming months.
Producer price inflation data on Friday is also expected to point to softer inflation.
The data is likely to reassure the Fed that inflation is on a sustainable path back to its 2% target.
The Fed kicked off the easing cycle last month with a hefty 50 basis point rate cut, and Friday’s jobs report suggested the central bank will not make another outsized cut in November.
“Next week, the CPI for September will be an important data release. If prices rise faster than expected, on top of stronger jobs data, the chances of the Fed skipping the November meeting will increase,” UBS analysts said in a note on Friday. “Note that in the dot plot released after the September FOMC meeting, nearly half of the participants believed total cuts of 50-75 bps would be appropriate. until the end of the year, i.e. only 0-25 m.p. additional cuts this year.”
Proceedings of the Fed
The Fed is due to release minutes from its September meeting on Wednesday, with investors looking for clues about how officials are thinking about the pace of easing going forward.
Additional information on the factors that led policymakers to reach a consensus around the 50 bp reduction would also be noteworthy.
Investors will also have a chance to hear from several Fed officials over the coming week, including Neel Kashkari, Raphael Bostic, Adriana Kugler and Lorie Logan.
Meanwhile, Thursday’s initial jobless claims report is likely to be affected by recent weather disturbances.
Earnings begin
The U.S. third-quarter earnings season is about to get under way, in a test for a stock market that is near record highs and trading at high valuations.
Financial majors such as JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC) and BlackRock (NYSE:BLK) report on Friday.
Bank results offer an important insight into the economy, including the strength of demand for loans. Investors will also be on the lookout for signs of whether the Fed’s big rate cut last month is already affecting the economy by boosting auto sales or buying other big items.
Other companies reporting results during the week include PepsiCo (NASDAQ:PEP) and Delta Air Lines (NYSE:DAL).
Optimistic investors hope the results will justify increasingly rich stock market valuations. The S&P 500 is up 20% for the year so far and is trading near record highs despite recent volatility caused by rising geopolitical tensions in the Middle East.
Oil prices
Oil prices rose on Friday to post their biggest weekly gain in more than a year on the growing threat of a region-wide war in the Middle East, although gains were limited as US President Joe Biden deterred Israel from targeting Iranian oil facilities.
Israel has vowed to hit Iran for launching a barrage of missiles at Israel last Tuesday after Israel killed the leader of Iran-backed Hezbollah. The events prompted oil analysts to warn clients about the potential impact of a wider war in the Middle East.
On a weekly basis, Brent crude gained more than 8%, the most in a week since January 2023. WTI gained 9.1% on a weekly basis, the most since March 2023.
Iran is a member of OPEC+ with production of about 3.2 million barrels per day or 3% of global production. The group’s excess capacity should allow other members to increase output if Iranian supplies are disrupted, limiting oil price gains.
RBNZ
New Zealand’s central bank meets on Wednesday and some market watchers believe it could follow the Fed’s lead and cut interest rates by half a point.
The central bank cut the official funds rate for the first time in more than four years at its last meeting in August, a year ahead of its own forecasts, and RBNZ governor Adrian Orr said he would like to make two more cuts by at Christmas.
Meanwhile, the Reserve Bank of Australia is due to release the minutes of its September meeting on Tuesday, with market watchers looking for clues about its hawkish stance. The RBA’s deputy governor, Andrew Hauser, is scheduled to speak on the same day.
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Reference;
Burke, N. (2024) Top 5 things to watch in markets in the week ahead By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/economy/top-5-things-to-watch-in-markets-in-the-week-ahead-3650171 (Accessed: 6 October 2024).
