Top 5 Things to Watch in Markets in the Week Ahead
Investors in South Africa and around the world are closely watching the U.S. inflation data set to be released this week. This data holds the key to understanding the future direction of interest rates, especially after the strong jobs report last Friday.
August’s Consumer Price Index (CPI) report already showed the fastest increase in 14 months, driven by a surge in gasoline prices. However, core inflation, which excludes food and fuel costs, rose at the slowest pace in nearly two years. Friday’s job data revealed a larger-than-expected surge in employment, but with slowing wage growth, it suggests that monetary policy could remain tight for some time.
If this week’s inflation figures show a spike, it could reinforce the Federal Reserve’s message that interest rates need to remain higher for a longer period. The Fed’s upcoming meeting is expected to hold rates steady, but some traders are betting on another increase.
Wednesday will see the release of the Federal Reserve’s meeting minutes from September. Investors will be closely scrutinizing these minutes for clues on whether policymakers are leaning towards another rate hike before the end of the year.
Additionally, several Fed officials, including Atlanta Fed President Raphael, Minneapolis Fed President Neel, Boston Fed President Susan Collins, Dallas Fed President Lorie, along with Vice Chair Philip, and Governor Christopher will provide insights during the week. Their comments could further shape market expectations regarding interest rates.
Third Quarter Earnings Kick-Off
The third quarter earnings season is commencing with reports from several major banks. Wall Street investors are eagerly awaiting these reports as they seek a catalyst to boost stocks amidst rising bond yields.
JPMorgan, Citigroup, and Wells Fargo are among the first to report, and investors will be keen to assess the impact of higher rates on loan demand and consumer behavior. Other notable companies reporting during the week include snacks and beverages giant PepsiCo, Delta Air Lines, and insurer UnitedHealth Group.
Earnings season could have a significant influence on the near-term trajectory of stocks, especially as the stock market has maintained a 10% gain for the year, even after recent pullbacks.
Last week witnessed the steepest weekly losses in oil prices since March, primarily due to concerns about macroeconomic headwinds and the partial lifting of Russia’s fuel export ban.
As of Friday, Brent crude settled at $84.58 per barrel, while WTI crude settled at $82.79. Brent recorded a decline of about 11%, and WTI dropped over 8% for the week. The persistently high interest rates are worrying investors as they fear a slowdown in global growth and reduced fuel demand, despite supply cuts by Saudi Arabia and Russia.
Additionally, escalating geopolitical risks in the Middle East could further impact oil prices in the week ahead, potentially affecting the South African Rand equivalent.
IMF and World Bank Meetings
Global finance officials and central bankers are converging in Marrakesh, Morocco, for the annual meetings of the International Monetary Fund (IMF) and the World Bank. These meetings occur against a backdrop of concerns about whether inflation can be brought back under control without triggering a crisis in major economies.
Central bankers and policymakers will make multiple appearances during the meetings, and on Tuesday, the IMF’s World Economic Outlook, containing updated forecasts, will be released. These events are of particular interest to South African investors and policymakers as they can offer insights into the global economic landscape.
As South African investors navigate the complex world of global markets, keeping a close eye on these five key developments in the week ahead is crucial. Inflation data, Fed minutes, earnings reports, oil prices, and international finance meetings will collectively shape market sentiment and investment decisions. Stay informed and make well-informed choices to secure your financial future.