Top 5 things to watch in markets in the week ahead

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By Noreen Burke

Investing.com -- Investors will be closely watching Tuesday's U.S. inflation data for clarity on the Federal Reserve’s rate hike path. Earnings season is winding down while the U.K. is set to release a deluge of economic data. Japan’s government is set to nominate a new central bank governor and the Eurozone is to release updated quarterly economic forecasts. Here’s what you need to know to start your week.

1. CPI data

Investors will be keenly awaiting Tuesday's CPI figures for signs that inflation is continuing to moderate after recent strong jobs data saw markets recalibrate expectations for how high the Fed may need to raise rates this year.

Inflation rose in December instead of falling as previously estimated and data for the prior two months was also revised up, the Labor Department's annual revisions of CPI data showed.

A strong inflation print could force markets to rethink whether the Fed will actually cut rates by year-end - potentially hurting a rally that has boosted stocks and bonds after last year's rout.

The economic calendar also features data on January retail sales, PPI data and the weekly report on initial jobless claims.

Several Fed officials are due to make appearances during the week, including New York Fed President John Williams, St. Louis Fed head James Bullard, Philadelphia Fed President Patrick Harker and Cleveland Fed head Loretta Mester.

2. Earnings winding down

The Nasdaq posted its first weekly fall for this year last week, down 2.41%, while the S&P 500 ended the week lower 1.11% and the Dow Jones lost 0.17%, in a week dominated by hawkish commentary from Fed officials and earnings reports.

More than half of the firms listed on the S&P 500 have reported earnings, with 69% beating profit estimates for the quarter, according to Refinitiv data.

Notable earnings in the week ahead include Coca-Cola (NYSE:KO), which is due to report ahead of the open on Tuesday. Barrick Gold (NYSE:GOLD), Kraft Heinz (NASDAQ:KHC), Krispy Kreme (NASDAQ:DNUT) and Biogen (NASDAQ:BIIB) are all set to report before the open on Wednesday while Deere (NYSE:DE) will report before Friday’s market open.

3. U.K. data

U.K. inflation and jobs data this week will help the Bank of England determine whether to hike rates again in March.

The BOE has flagged that February’s 50 basis point rate hike may have been the last in its current tightening cycle, but January's inflation report on Wednesday is expected to show price increases still in double digits.

Meanwhile, Tuesday’s jobs report is expected to show that wage growth is continuing to rise, keeping pressure on the BOE and January retail sales data on Friday is expected to show another decline.

The BOE forecast last week that Britain would enter a shallow but lengthy recession, starting in the first quarter of this year and lasting five quarters.

4. Bank of Japan

On Tuesday Japan's government is set to officially nominate an unexpected candidate to replace Haruhiko Kuroda, whose decade as Bank of Japan governor will end soon.

The yen initially moved higher following reports on Friday that Kazuo Ueda, a 71-year-old academic and a former member of the BOJ policy board, will be nominated but the currency gave back some of its gains after he expressed support for the central bank's current position.

Whether, when and how the BOJ adjusts its policy stance is one of the major questions facing markets globally this year. BOJ watchers suspect its ultra-loose monetary policy is likely to shift as inflation moves higher.

While Ueda is considered an expert on monetary policy, most analysts said his appointment was totally unexpected and could signal a move to phase out ultra-low interest rates sooner than initially expected.

5. Eurozone

The European Commission is to release quarterly economic forecasts for the euro area on Wednesday. Ahead of that the Eurozone is to release revised GDP data on Tuesday.

European Central Bank President Christine Lagarde is due to testify on the bank's annual report before the European Parliament in Strasbourg on Wednesday.

Other ECB officials due to make appearances during the week include Chief Economist Philip Lane, Vice President Luis de Guindos along with Executive Board members Fabio Panetta and Isabel Schnabel.

--Reuters contributed to this report