The war in Ukraine will remain in focus, with markets continuing to monitor headlines. Oil markets are calmer but concerns over supply shortages remain to the fore. The economic calendar is light but there will be two appearances from Fed Chair Jerome Powell during the week, while the Eurozone and the U.K. are to release PMI data. Here’s what you need to know to start your week.
Stocks to sustain upswing?
U.S. stocks stormed back last week after the Fed delivered its first rate hike since 2018 along with an encouraging assessment of the U.S. economy.
Wall Street's three main indexes notched up their largest weekly percentage gains since early November 2020 with the Dow climbing 5.5%, the S&P 500 adding 6.2% and the Nasdaq rising 8.2%.
But investors must now wrestle with the question of whether the Fed will be able to fight soaring inflation without pushing the economy into recession.
Last week JPMorgan forecast the S&P 500 would end the year at 4,900, about 10% above Friday’s close, saying that markets “have now cleared the much-anticipated Fed liftoff with policy likely as hawkish as it gets."
But concerns over stubbornly high inflation, sky-high commodity prices and few signs of an end to the war in Ukraine are continuing to cloud the outlook for investors.
Market watchers will continue to monitor the course of the war in Ukraine and headlines could continue to cause market turbulence in the upcoming week. Diplomacy efforts are ongoing even as Russian strikes on Ukrainian cities continue.
U.S. President Joe Biden is to join a NATO meeting on Wednesday and also a mid-week EU summit in Brussels, aiming to cement the new-found cohesiveness with European allies.
The West is risking rifts with China and India, which have not condemned Russia’s invasion of Ukraine.
On Friday, Biden warned his Chinese counterpart, Xi Jinping, of "consequences" if Beijing gave material support to Russia's invasion of Ukraine.
China has not condemned Russia's actions, though it has expressed concern about the war.
Chinese Vice Foreign Minister Le Yucheng said on Saturday that Western sanctions against Russia were "outrageous."
On Monday, Fed Chair Jerome Powell is to speak about the economic outlook at the annual conference of the National Association for Business Economics, less than a week after the Fed kicked off what is expected to be an aggressive monetary policy tightening cycle.
On Wednesday, Powell is to participate in a virtual panel discussion at a summit hosted by the Bank for International Settlements.
Several other Fed officials are also due to make speeches during the week, including New York Fed President John Williams, San Francisco Fed President Mary Daly, Cleveland Fed President Loretta Mester, Minneapolis Fed President Neel Kashkari, Fed Governor Christopher Waller and Chicago Fed President Charles Evans.
The U.S. economic calendar is relatively light and will feature reports on durable goods orders, initial jobless claims, both new and pending home sales, as well as services and manufacturing PMI data.
Last week oil prices recorded a second consecutive weekly decline, with both Brent and U.S. crude ending the week down about 4%.
Oil prices have been on a roller coaster ride, hitting the highest levels in 14 years two weeks ago, boosted by the supply crunch from traders avoiding Russian barrels and dwindling oil stockpiles.
But prices were pressured by worries about demand after a surge in coronavirus cases in China, while faltering nuclear talks with Iran have been a wild card on the market.
The International Energy Agency has said oil markets could lose 3 million bpd of Russian oil from April. That loss would be far greater than an expected drop in demand resulting from higher fuel prices, the IEA said.
The Ukraine crisis has exacerbated the issue of limited output capacity. The world is set for a supply deficit of 700,000 bpd in the second quarter, the IEA has said.
Eurozone, U.K. PMIs
The Eurozone and the U.K. are to release PMI data for March that will be a litmus test of sorts of the impact from the war in Ukraine.
Generally, PMIs have held above the 50-mark that divides contraction from expansion. But after the ZEW index showed a record slump in German investor morale in March, a recession in the euro area’s largest economy cannot be ruled out.
Markets shrugged off the slump in the ZEW index, focusing instead on efforts by central banks to curb inflation.
But as soaring energy costs squeeze household spending, a downbeat batch of PMIs might set off alarm bells.
Earnings season kicks into high gear in the coming week but concerns over persistently high inflation, a hawkish Federal Reserve and uncertainty arising out of the war in Ukraine look likely to continue to dominate market sentiment.
9 months, 2 weeks ago