Washington, US (BBN) – After a relatively quiet week, the changing of the guard at the Federal Reserve will be a big focus for investors in the week ahead, as they look for fresh clues on the likely trajectory of monetary policy.
Staying in the US, a report on personal income and spending, which includes the personal consumption expenditures inflation data, the Fed’s preferred metric for inflation, will be the highlight of the week, reports Investing.com.
Elsewhere, in Europe, investors will await monthly inflation data to assess how fast the European Central Bank will start unwinding its asset purchase program.
Meanwhile, market participants will be looking ahead to monthly data on China’s manufacturing sector amid recent signs that momentum in the world’s second largest economy remains strong.
Also of note, energy markets will be focused on the Organization of Petroleum Exporting Countries highly-anticipated meeting to see whether major producers plan to extend their current production-cut agreement.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. FEDERAL RESERVE SPEAKERS
Market players will be focused on comments from a number of Federal Reserve speakers, including both the current chair and next head of the U.S. central bank.
Fed governor Jerome Powell, selected by President Donald Trump as the next Fed chair, appears before the Senate Banking Committee at 9:45AM ET (1445GMT) Tuesday for his confirmation hearing.
The following day, Fed Chair Janet Yellen testifies on the economy at 10AM ET (1500GMT) on Capitol Hill, before the Joint Economic Committee.
Powell is widely expected to sound close to Yellen on monetary policy, but perhaps looser when it comes to banking regulation.
Besides Powell and Yellen, there are a number of other Fed speakers this week, including New York Fed President William Dudley, who also is expected to exit his role next year.
The U.S. central bank is scheduled to hold its final policy meeting of the year on Dec. 12-13, with interest rate futures pricing in a 100% chance of a rate hike at that meeting, according to Investing.com’s Fed Rate Monitor Tool.
However, markets appeared doubtful over the central bank’s ability to raise rates as much as it would like next year due to concern over the sluggish inflation outlook.
2. US PCE INFLATION
The Commerce Department will publish data personal income and consumer spending for October, which include the personal consumption expenditures (PCE) inflation data, the Fed’s preferred metric for inflation, at 8:30AM ET (1330GMT) Thursday.
The consensus forecast is that the report will show that the core PCE price index inched up 0.2% last month. On an annualized basis, core PCE prices are expected to rise 1.4%.
The Federal Reserve uses core PCE as a tool to help determine whether to raise or lower interest rates, with the aim of keeping inflation at a rate of 2% or below.
This week’s calendar also features the second estimate of GDP growth for the third quarter on Wednesday, expected to show a small upward revision from 3.0% to 3.2%.
Reports on ISM manufacturing sector growth, CB consumer confidence, new home sales, pending home sales and monthly auto sales will also be on the agenda.
Elsewhere, in the stock market, investors will be looking for early returns on the start of the holiday shopping season, and the results of the Cyber Monday shopping day.
On the political front, tax reform will likely stay at the forefront, as markets look for any new developments on the Trump Administration’s tax bill.
The president will meet with Senate Republicans on Tuesday to discuss their party’s efforts to pass tax reform legislation, with a vote on their bill coming as soon as Thursday.
3. EURO ZONE FLASH INFLATION
The euro zone will publish flash inflation figures for November at 1000GMT (5:00AM ET) Thursday.
The consensus forecast is that the report will show consumer prices rose 1.6%, accelerating from 1.4% in October, but remaining short of the European Central Bank’s target of just below 2%. Perhaps more significantly, the core figure, without volatile energy and food prices, is seen rising to 1.0% from 0.9% a month earlier.
Germany, France, Italy and Spain will produce their own CPI reports throughout the week.
The ECB last month said it would cut its bond purchases in half from January, but extended the program until the end of September and left the door open to backtracking, citing continuously low inflation.
4. CHINESE MANUFACTURING PMI
The China Federation of Logistics and Purchasing is to release data on November manufacturing sector activity at 0100GMT on Thursday, amid expectations for a modest downtick to 51.5 from a reading of 51.6 in October.
The Caixin manufacturing index, which focuses more on small and mid-sized firms, is due at 0145GMT Friday. The survey is expected to dip by 0.1 points to 50.9.
A Chinese slowdown is one of the major risks to continued global growth, so a major change in this data could cause some concerns.
The purchasing managers’ index (PMI) is seen as a good indicator of economic conditions and it is even preferred by some analysts to gross domestic product, which might be affected by poor seasonal adjustment and is prone to revisions.
Anything above 50.0 signals expansion, while readings below 50.0 indicate industry contraction.
China’s economy grew 6.8% in the third quarter, a touch softer than the 6.9% growth seen in the second quarter of the year.
5. OPEC MEETING
Oil ministers from the Organization of Petroleum Exporting Countries and other major producing countries will meet in Vienna on Thursday to decide whether to extend their current production agreement beyond a March 2018 deadline.
Most market analysts expect the oil cartel to extend output cuts for a further nine months until the end of next year, but the terms were so far unclear, as Russia has sent mixed signals about whether it will back the move.
In November last year, OPEC and 11 other non-OPEC producers, led by Russia, agreed to cut output by about 1.8 million barrels per day between January 1 and June 30. The agreement was extended in May of this year for a period of nine months until March 2018 in a bid to reduce global oil inventories and support oil prices.
The OPEC-led production cuts have been one of the key catalyst supporting the recent rally in oil prices amid expectations that rebalancing in oil markets are well underway.