Top 5 Things To Watch In The Markets In The Week Ahead By


by Noreen Burke — Next week’s highlight will be Wednesday’s minutes from the Federal Reserve’s March meeting, to be scrutinized amid widespread expectations of a half percentage point interest rate hike next month. . Along with concerns about the economic impact of tighter monetary policy, developments around the war in Ukraine will continue to be in the spotlight. While stocks have shrugged off concerns about growth prospects, the bond market is showing warning signs. The European Central Bank will also publish minutes, while the Reserve Bank of Australia will meet. Meanwhile, oil prices will remain in the spotlight after their steepest weekly drop in two years. Here’s what you need to know to start your week.

  1. federal minutes

The Fed’s Wednesday March meeting will give investors an update on how officials view the outlook for monetary policy and may also contain more details on plans to reduce the central bank’s $9 trillion balance sheet.

The Fed raised rates last month by a quarter of a percentage point, the first step in a tightening cycle aimed at curbing inflation, currently at a four-decade high. Since the March meeting, several Fed officials, including Chairman Jerome Powell, have indicated they are prepared to raise rates more aggressively to prevent high inflation from taking hold.

Friday paved the way for a half percentage point rate hike by the Fed at its next meeting on May 4.

Several Fed officials will also make appearances throughout the week, including Fed Governor Lael, Minneapolis Fed President Neel Kashkari, New York Fed President John, and New York Fed President St.Louis, James.

  1. The bond market flashes red

A closely watched part of the US Treasury yield curve inverted again on Friday after the strong US jobs report solidified expectations of further rate hikes by the Federal Reserve.

An inversion of the yield curve, when shorter-term yields outperform longer-term ones, is a phenomenon that has predicted past recessions.

Stock markets have apparently shrugged off concerns that tighter monetary policy and uncertainty stemming from the war in Ukraine could push the economy into recession, but bond investors appear to have taken a more dovish view. .

However, some analysts believe the reliability of yield curve inversions as a recession indicator has diminished, particularly as the Federal Reserve’s massive bond-buying programs keep long-term yields suppressed.

  1. Oil price volatility

Both oil and crude oil ended last week down about 13%, their biggest weekly declines in two years after the US president announced the US Strategic Petroleum Reserve.

The Russian invasion of Ukraine has caused oil prices to rise by around 30% in the first quarter, and rising energy costs have become a key driver of inflation expectations.

But energy market analysts were skeptical about the plan’s success.

“The knee-jerk liquidation of SPR’s announcement of the release of 1 million barrels per day of SPR over the next six months will not have a lasting impact on oil prices, so if geopolitical risks continue to intensify, oil will rally. . most of this week’s losses,” said Ed Moya, an analyst at online trading platform OANDA.

  1. Economic data

Aside from Wednesday’s Fed minutes, the economic calendar is light for the week ahead and the main focus is likely to be Tuesday’s ISM Services PMI.

Economists expect the index to rebound from a 12-month low of 56.5 in March. The effects of the Omicron wave caused the index to fall from an all-time high of 69.1 reached in December and concerns about rising inflation may now limit consumer demand.

The US will also release , and .

  1. central banks

The ECB will publish the one for its March meeting, with just over a week to go before its next meeting on April 14. The ECB surprised markets last month when it announced it was accelerating plans to withdraw stimulus measures.

Since then, data has shown eurozone inflation hit a new all-time high of 7.5% in March, increasing pressure on the ECB to act to reduce inflation even as economic growth is slowing amid of the lingering effects of the pandemic and the consequences of the war in Ukraine. .

Elsewhere, it is expected to keep its rate unchanged at its latest policy-setting meeting on Tuesday.

The Bank of Canada is due to release its report on Monday and an upbeat reading could cement expectations for a half percentage point rate hike at its next meeting on April 13.

–Reuters contributed to this report

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