Global markets opened the week with minor losses as investors will be looking to the release of major corporate earnings and economic reports that will give a clue whether the weakening U.S. economic activity and the higher unemployment rate will be enough for the Federal Reserve to bring inflation back to the 2% target.
The fresh economic reports will be very important for policymakers as they could influence the central bank’s next monetary policy actions, including a fresh decision on interest rates, at its next meeting on May 2-3, with market participants pricing in a further 25-bps rate hike.
Last week’s economic data for the U.S. economy were mixed, with Friday’s flash PMI for April coming in above expectations in both the services and manufacturing sectors, while Thursday’s Philadelphia Fed manufacturing index reading for April showed that business activity in the region continued to contract by more than previously anticipated.
Tech-heavy Nasdaq Composite trades just below its yearly highs, keeping its upside momentum amid the prospect of a less hawkish Federal Reserve, coupled with the softening dollar, and bond yields.
Nasdaq Composite, Daily chart
The earnings season has begun to ramp up in the United States, with economists looking ahead toward mega-cap tech earnings results this week such as Amazon, Microsoft, and Google-parent Alphabet, while many big banks are posting their quarterly results for the first time since the bank crisis in early March.
The banking sector will be looking to prove its resilience during a turbulent environment for depositors and policymakers, ahead of a major rate decision by the Fed.
Economic Data: Weekly Outlook:
The week ahead has a slew of some very interesting economic reports that will provide signs about the health of the U.S. economy and labor market, and further signals about the cooling inflation, which will be catalysts of the Fed’s future monetary policy actions.
On Monday and Tuesday, investors will be looking to the release of the latest Dallas Fed manufacturing index, and the U.S. CB Consumer Confidence report respectively for fresh market insights.
On Wednesday, we expect the release of CPI inflation data for Australia and the U.S. Durable Goods report, and on Thursday, the U.S. Advance GDP for Q1, and the key weekly “Unemployment Claims” report.
Meanwhile, on Friday, the Core PCE Price Index-personal consumption expenditure price Index will dominate the headlines, as it's one of the Fed’s favored inflation gauges.
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