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Top 5 Things to Watch in Markets in the Week Ahead

·4 min read

By Noreen Burke

Investing.com -- Investors will get an update on U.S. retail sales along with earnings results from several major retailers in the week ahead, which will be parsed for insights into the strength of consumer spending amid elevated price pressures. The Federal Reserve is to release the minutes of its July meeting which will be scrutinized for clues about the size of upcoming rate hikes. The U.K. is to release data on employment, retail sales and inflation, which is expected to close in on 10%, as the economy slides closer towards recession. Meanwhile, central banks in New Zealand and Norway are expected to announce big rate hikes. Here’s what you need to know to start your week.

U.S. retail sales

The U.S. is to release July retail sales figures on Wednesday which will be watched for indications on the strength of consumer spending after a slowdown in second quarter growth.

Economists are expecting an increase of just 0.1% after a gain of 1.0% the previous month, with falling gasoline prices accounting for some of the slowdown.

Investors will also get an update on the cooling U.S. housing market, with July data on housing starts due on Tuesday, after falling to a nine-month low in June.

U.S. existing home sales figures for July are due on Thursday after falling for a fifth straight month in June to the lowest level in two years.

Fed minutes

The Fed is to publish the minutes of its July meeting on Wednesday, which will be in the spotlight after economic data over the last two weeks boosted investors' hopes that the central bank can pull off a soft landing for the economy.

A blowout jobs report for July eased fears over the prospect of recession, while last week’s inflation data pointed to the largest monthly slowdown in consumer price increases since 1973.

Traders are currently pricing in a less hawkish Fed, with fed fund futures showing a greater chance of officials raising rates by 50 basis points when they meet in late September, instead of 75 basis points as they have done at their last two meetings.

But Fed policymakers have pushed back on expectations for a dovish pivot, and economists have warned that inflation could return in the coming months.

Retail earnings

After a rocky start to the year, which saw the S&P 500 tumble 20% in the first half, stronger-than-forecast second-quarter earnings have helped bolster U.S. equities.

Walmart (NYSE:WMT) and Home Depot (NYSE:HD) are due to report second quarter earnings on Tuesday, followed a day later by Target (NYSE:TGT) and Lowe’s (NYSE:LOW), with investors eager to hear what the largest U.S. retailers have to say about rising price pressures and ongoing supply chain issues.

Both Walmart and Target have recently cut forecasts and warned inflation was squeezing margins and forcing consumers to cut back on discretionary purchases.

Retailers' outlook on consumer spending will be important for investors looking to assess the pace of inflation.

U.K. economic data

After the Bank of England’s recent warning that the U.K. is facing a deep and prolonged recession investors will be paying close attention to data on inflation, retail sales and employment in the coming days.

Wednesday’s July inflation figures are expected to accelerate to 9.8% from 9.4% in June, moving closer to the 13.3% peak the BoE has forecast for October.

Retail sales data for July, due out on Friday, could provide more evidence of a downturn, with economists expecting a decline of 3.3% year-over-year after an annualized decline of 5.8% in June.

The labor market has so far remained robust, with almost 300,000 jobs added in the three months to May, leaving the unemployment rate at just 3.8%.

The latest employment report, due Tuesday will show if this pattern is continuing.

Rate hikes

The Reserve Bank of New Zealand is expected to raise interest rates by 50 basis points at its upcoming meeting on Wednesday, which would bring interest rates to their highest in seven years.

Elsewhere, Norway’s central bank is expected to hike rates when it meets on Thursday, after a 50-basis point rate hike in June. After the country’s latest inflation figures came in above central bank forecasts some economists are expecting another 50-basis point hike, but the central bank has indicated that it plans to hike rates by 25 basis points this month.

-Reuters contributed to this report

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