16 May 2022 – The Week Ahead

Outlook:

In the week ahead, we provide you with the necessary information to build your strategy during the upcoming week with extra knowledge.

While growth outside China has shown some encouraging resilience, this can be linked to resurgent spending on consumer services amid loosened COVID-19 restrictions. However, demand for consumer goods has stalled as household spending is diverted to services. Additionally, global economy looks reliant on a potentially short-lived rebound in consumer service spending to sustain economic growth.

In the U.S.

Economic data this week will be closely monitored, as market participants try to measure whether aggressive monetary policy by the Fed will result in tough or mild economic conditions.

Market participants expect Fed Chair Jerome Powell to emphasize that the Fed will hike rates by 50 basis points during its next two meetings. Likewise, other Fed speakers during the week.

Economists expect Tuesday’s retail sales for April to show 0.8% after a 0.7% in March. Also, investors will be looking to retail earnings for signs of how much the inflation have affected the buying power.

Equities ended higher on Friday after another volatile week in markets as hopes that inflation may be close to peaking. However, there are fears that aggressive policy tightening by the Fed could tip the economy into recession.

Despite Friday’s gains, the S&P 500 and the Nasdaq posted their sixth straight weekly loss, while the Dow recorded its seventh consecutive weekly decline. Yet, investors are looking for a sign of a market bottom, amid fears the sharp selloff in equities may not be over.

U.K. and Eurozone

Economists expected Wednesday’s report to show that U.K. consumer prices leaped to 9.1% on a year-over-year basis in April. Furthermore, that would be the largest jump in annual inflation since 1980 and the fastest rate of inflation since 1982. Theretofore, the Bank of England (BOE) said it expects inflation to rise above 10% in the fourth quarter.

UK jobs data on Tuesday is expected to underline tightness in the labor market, adding to wage and price pressures.

According to the S&P U.K. Composite PMI data, inflationary pressures worsened in April while private sector firms continued to expand staffing levels rapidly. Investors also will assess the impact of inflation on consumer confidence and retail sales data.

European Central Bank President is to speak on Tuesday, while the ECB is to publish its latest meeting minutes on Thursday. Also, European Q1 GDP and April HICP readings will be updated, as preliminary data showed the economy growing just 0.2% in the first three months of the year while inflation accelerated to 7.5%.

Asia-Pacific

Following trade and inflation data, China releases April industrial production and retail sales figures in the coming week. However, economists expect it to spot more light COVID-19 restrictions impact on economic performance during the second quarter. Furthermore, widespread lockdowns continue to affect the region, as investors expect retail sales and industrial data to have deteriorated.

Early PMI data across both the manufacturing and services showed output contracting very sharply in April. Market pariticpants will be watching Japan’s Q1 performance for the extent of the slowdown with forecast pointing to a 0.6% (q/q) decline.

The latest PMI data for April point to a slowdown in economic growth momentum in Chinese manufacturing and services sectors. Additionally, the negative economic shocks from COVID-19 restrictions and lockdowns in March have intensified in April is hitting consumption spending.