Top 5 things to watch in markets in the week ahead

© Reuters

By Noreen Burke

Investing.com -- It’s set to be a much quieter week on the economic calendar, but there’s still plenty for markets to mull over after last week’s rate hike by the Federal Reserve and Friday’s unexpectedly strong U.S. nonfarm payrolls report. Earnings season continues with media and consumer stocks in the spotlight. The Reserve Bank of Australia is set to hike rates again, while data in the Eurozone and the U.K. will be closely watched. Here’s what you need to know to start your week.

1. Powell speech

After Friday’s blockbuster U.S. jobs report forced investors to recalibrate expectations over how hawkish the Fed may need to be in its efforts to rein in inflation, markets will be closely watching an appearance by Fed Chair Jerome Powell on Tuesday.

The Labor Department reported Friday that the economy added 517,000 jobs in January, almost three times what was expected.

Last week Powell acknowledged progress in the fight again inflation, but the unexpectedly strong jobs data has potentially given the central bank more leeway to keep hiking rates.

Investors are fearful that the Fed’s aggressive rate hikes will plunge the economy into a recession.

There will be an update on the labor market with Thursday’s initial jobless claims numbers, while several other Fed officials are also scheduled to make appearances, including New York Fed President John Williams, Minneapolis Fed President Neel Kashkari and Atlanta Fed President Raphael Bostic.

2. Earnings season

Earnings season rumbles on with media and consumer industry stocks taking their turn at the fore.

Walt Disney (NYSE:DIS), which faces a proxy battle over board representation, and News Corp (NASDAQ:NWSA), which scrapped a plan to reunite with Fox Corp, are reporting on Wednesday and Thursday, while the New York Times (NYSE:NYT) is also due to report on Wednesday.

Earnings from PepsiCo (NASDAQ:PEP) and Kellogg (NYSE:K) on Thursday will offer insight into how consumers are grappling with inflation. More than 90 S&P 500 companies are expected to post results in the coming week.

With 190 companies having reported, S&P 500 earnings are set to have declined 2.4% in the fourth quarter from a year ago - a steeper fall than the 1.6% drop predicted on Jan. 1, according to Refinitiv data.

3. Central banks

Markets are expecting another quarter-point rate hike by the Reserve Bank of Australia on Tuesday after inflation surged to the highest level in 33 years in the last quarter, defying the RBA's aggressive tightening campaign.

Other economic data shocked the other way as retail sales fell by the most since during the pandemic and house prices suffered their biggest drop since at least 1980.

The Aussie dollar's outlook is untarnished: as long as China's reopening is on track, the currency should push higher.

Meanwhile, the Reserve Bank of India's inflation fight may be over, with economists forecasting another 25 basis point rate hike on Wednesday before a pause.

4. Eurozone

Comments by European Central Bank officials will be closely watched after the ECB hiked rates by 50 basis points last Thursday and all but promised more of the same in March.

ECB President Christine Lagarde cited high core inflation to explain why "we have more ground to cover and we are not done".

ECB Vice President Luis de Guindos and Executive Board member Isabel Schnabel are due to make appearances in the coming days, along with Germany’s central bank President Joachim Nagel.

Germany is to release January inflation data - delayed from last week - on Thursday, which economists expect to accelerate again.

Ahead of that, Germany is to release data on factory orders on Monday followed by a report on industrial production on Tuesday.

5. U.K. to dodge recession

The U.K. is to release gross domestic product data on Friday, which is expected to show that the economy flatlined in the fourth quarter, narrowly avoiding a recession.

Last week the Bank of England said Britain remained set for a recession this year but it was likely to be "much shallower" than previously feared due mostly to lower energy prices and weaker market interest rate expectations.

The BOE hiked rates for the tenth meeting in a row last Thursday but said the tide was turning in its battle against inflation.

Britain's economy has been hard hit by the energy crisis after Russia's invasion of Ukraine. It has also suffered a fall in the size of its workforce along with low business investment and weak productivity growth in the wake of Brexit.

--Reuters contributed to this report