Top 5 things to watch in markets in the coming week


By Noreen Burke — Investors’ attention will be fully focused on the Federal Reserve for the coming week, with policymakers widely expected to realize a third consecutive rate hike of 75 basis points on Wednesday. The Fed isn’t the only game in town – central bank policymakers in the UK, Switzerland and Japan will also meet this week as the global battle against inflation intensifies. Meanwhile, US equities look poised for another volatile week amid fears that higher interest rates will wreak havoc on the economy. Here’s what you need to know to start your week.

  1. Fed decision

Higher-than-expected US data for August cemented expectations for another jumbo Fed rate hike at the end of its Wednesday.

Markets have priced in a 75 basis point rate hike, but some investors are bracing for a full percentage point hike — a move unimaginable just recently.

Market observers will be on the lookout for how the US central bank views the current pace of monetary tightening, the strength of the economy and how likely inflation is to continue, as well as signs of how balance sheet unwinding is progressing.

Some worry that the process of the Fed cutting its balance sheet by $95 billion a month could hurt market liquidity and weigh on the economy.

  1. bank of England

The meetings on Thursday after last week’s meeting was postponed a week for Queen Elizabeth II’s funeral. Policymakers are expected to raise interest rates by another 50 basis points, which would bring the bank rate to 2.25%, although a 75 basis point hike is still on the table.

It will be the first BoE meeting since announcing a government cap on energy prices, which means inflation is expected to be lower than it would have been, but the injection of money into consumers’ wallets is likely to keep it high for longer. .

On Friday, new Finance Minister Kwasi Kwarteng will hold a “fiscal event” – his first statement on how he plans to deliver on new Prime Minister Liz Truss’ promise to make the UK a low-tax economy, which will can fuel inflation.

The seemingly opposing directions of monetary and fiscal policy underscore the challenges facing the UK economy, which has the highest of the world’s largest economies, but is also at risk of sliding into recession.

  1. Global Central Banks

Thursday’s meetings with officials are expected to yield a 75 basis point rate hike, in line with the European Central Bank’s recent move, although in the eurozone, Switzerland is far outpacing Switzerland.

Elsewhere in Europe, the Bank of Norway is expected to raise interest rates on Thursday as inflation continues to exceed forecasts.

The stock market also meets on Thursday amid speculation that Japanese authorities may be about to intervene in the foreign exchange market to support the weak, which hit a 24-year low against the dollar earlier this month.

The dollar was supported by the view that the Fed will continue to tighten policy aggressively, while the BoJ holds on to unprecedented easing.

  1. PMI data

The first look at European business activity in September comes on Friday with the release of Eurozone and UK PMI data

It has already spent two months below the 50 level separating contraction and expansion – a sign that the bloc may slip into recession sooner than previously thought as the energy shock and tighter monetary policy bite.

Last Thursday, the World Bank warned that the global economy is slowing sharply, and that even a “moderate blow to the global economy over the next year could send it into recession” as central banks simultaneously raise interest rates to combat ongoing inflation.

  1. US stocks

US equities ended in the red on Friday with the release of their biggest weekly percentage declines since June amid inflation concerns, impending rate hikes and ominous economic warning signs.

The volatile price of US equities this year shows no sign of abating as persistently high inflation rates make it likely that the Fed will raise interest rates faster and further than previously expected, increasing the likelihood of a recession.

“While the market expects a major hike in Fed interest rates next week, there is tremendous uncertainty and concern about future rate hikes,” said David Carter, general manager at JPMorgan in New York told Reuters on Friday. “The Fed is doing what it has to do. And after some pain, the markets and the economy will heal themselves.”

-Reuters contributed to this report

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