Top 5 things to watch in markets in the week ahead

Investing.com -- Friday’s U.S. jobs report will be the highlight of what will be a holiday-shortened week as markets look for clarity on when exactly rate cuts could start. Comments by Federal Reserve Chair Jerome Powell will be closely watched, along with Wednesday’s minutes of the U.S. central bank’s latest meeting. Elections in France and the UK will also keep markets on high alert. Here’s your look at what's happening in markets for the week ahead.

U.S. jobs data

Investors will be focusing their attention on Friday’s nonfarm payrolls report as they look for fresh indications on when the Federal Reserve might start to cut interest rates.

Economists are expecting the U.S. economy to have added 189,000 jobs in June after a larger than forecast gain of 272,000 the previous month highlighted the resilience of the labor market.

The Fed kept rates unchanged earlier this month and pushed out the start of rate cuts to perhaps as late as December, as officials look for more convincing signs that inflation is pulling back to the central bank's target, or evidence that the labor market is cooling.

Ahead of the nonfarm payrolls data, a report on Tuesday is expected to show that job openings declined again in May, indicating that companies are having more success filling positions.

Powell, Lagarde comments; Fed minutes

Fed Chair Jerome Powell is to make an appearance at the European Central Bank’s annual forum in Sintra, Portugal on Tuesday.

Powell, along with ECB President Christine Lagarde is to participate in a panel discussion on "monetary policy in an era of transition" with investors on the lookout for any fresh insights on the future part of interest rates.

Inflation is receding after spiking in the first quarter but continues to run above the Fed’s 2% target.

Meanwhile, Wednesday’s minutes of the Fed’s June meeting will be parsed for the central bank’s view of the economic outlook and the factors influencing the monetary policy outlook.

Elections in France, UK

France goes to the polls on Sunday, the first round of its shock snap election that has roiled markets.

Investors will look out for any hints of the results of the second round a week later. But a 577-constituency race where candidates just need 12.5% of the vote to make it to the second round, also featuring three-way races, means uncertainty may prevail.

Meanwhile, polls predict a landslide British election win for the opposition Labour Party on Thursday, sending sterling back to levels not seen since 2016's Brexit vote.

Traders see a return to stability after heavy political turbulence during the Conservatives' 14-year rule and have speculated Labour leader Keir Starmer could rebuild trade links with Europe.

But it remains to be seen how large of a majority Starmer will be able to command in Parliament.

Eurozone inflation

The Eurozone is to release June inflation data on Tuesday, following Germany’s report on Monday, with economists expecting a slight slowdown in both the headline and underlying measures after an uptick in May.

The ECB is to publish the minutes of its June meeting, when it cut interest rates for the first time since September 2019, on Thursday.

Though the ECB began hiking interest rates later, the June cut put it ahead of the Fed on its march lower, as the world’s largest central bank remains stymied by above target inflation.

China PMIs

Official data on Sunday showed that manufacturing activity in China declines for a second month in June while services activity slipped to a five-month low, keeping alive calls for further stimulus as the world’s second largest economy struggles to gain momentum.

The Caixin manufacturing PMI, due Monday, is expected to tick lower.

Analysts expect China to roll out more policy support measures in the short term, while a government pledge to boost fiscal stimulus is seen helping kick domestic consumption into a higher gear.

--Reuters contributed reporting

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