Top 5 Things to Watch in Markets in the Week Ahead

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Top 5 Things to Watch in Markets in the Week Ahead

By Noreen Burke

Investing.com -- Data on inflation will be the highlight of the U.S. economic calendar in the week ahead as investors continue to digest the Federal Reserve’s decision to begin tapering stimulus measures, marking the beginning of less accommodative monetary policy. Several Fed officials, including Chairman Jerome Powell, are scheduled to make appearances with investors on the lookout for their views on elevated price pressures. Earnings season is winding down, but there are still several companies set to report during the week. The UK is set to report growth data and China’s Communist Party looks set to green-light a third term for President Xi Jinping. Here’s what you need to know in the coming week.

  1. Inflation data

Data on producer price inflation for October is scheduled for release on Tuesday, followed a day later by figures on consumer price inflation.

The CPI numbers are expected to hit their highest levels so far post-pandemic, with economists forecasting an increase of 0.6% month-on-month and 5.8% year-on-year. Core inflation, which excludes food and energy costs, is expected to rise by an annualized 4.3% .

At its latest meeting the Fed stuck to the view that high inflation would prove "transitory" and is not likely to require a rapid increase in interest rates, prompting investors to call it a "dovish taper."

While the central bank has so far managed to communicate plans to begin scaling back its monthly bond purchases without triggering a taper tantrum, elevated inflation figures that fuel rate hike speculation could change that.

  1. Fed speakers

Fed Chairman Jerome Powell is scheduled to make two appearances during the week, the first at an online conference on Monday on gender and the economy hosted by the Fed. On Tuesday he is due to speak at an online conference on diversity and inclusion in economics and central banking, jointly hosted by the Federal Reserve Board, Bank of Canada, Bank of England, and European Central Bank.

Other Fed officials speaking during the week include Fed Vice Chairman Richard Clarida, New York Fed President John Williams, Fed Governor Michelle Bowman, Philadelphia Fed President Patrick Harker, Chicago Fed President Charles Evans and San Francisco Fed President Mary Daly.

  1. Earnings

Better-than-expected third-quarter earnings have boosted equities and Wall Street's main indexes closed at record highs on Friday following a strong U.S. jobs report and positive data for Pfizer 's  (NYSE: PFE ) experimental antiviral pill for COVID-19.

The latest slew of earnings could provide a catalyst for fresh market highs. Companies reporting in the coming week include entertainment company Walt Disney (NYSE: DIS ), drugmakers AstraZeneca (NASDAQ: AZN ) and BioNTech (NASDAQ: BNTX ) along with Softbank (OTC: SFTBY ), PayPal (NASDAQ: PYPL ), Coinbase (NASDAQ: COIN ), AMC Entertainment (NYSE: AMC ), Krispy Kreme (NASDAQ: DNUT ) and Adidas (OTC: ADDYY ) among others.

  1. UK GDP

After the Bank of England wrong-footed markets with its decision to keep interest rates on hold last week the UK is due to release data on third quarter growth on Thursday. GDP growth is expected to slow to 1.5% from the previous quarter.

Investors had anticipated that the BoE would be the first of the world's major central banks to hike interest rates after the COVID-19 pandemic.

The BoE kept alive the prospect of a move soon, saying it would probably have to raise rates from an all-time low of 0.1% "over coming months" if the economy performed as expected, but thought "there was value in waiting" for data on the labor market.

  1. China

The top leaders of the Chinese Communist Party are set to meet in Beijing from Monday through Thursday, where the decision-making Central Committee could give the go-ahead for an unprecedented third term for President Xi Jinping.

The meeting comes at a time when growth in the world’s second largest economy is faltering amid stringent measures to curb virus outbreaks, a clampdown on the property market, energy shortages and disrupted supply chains.

Data on Sunday showed that Chinese exports slowed in October, but still beat forecasts while imports fell short of forecasts, pointing to continued weakness in domestic demand.

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