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Top 5 things to watch in markets in the week ahead

Published 17/03/2024, 11:42
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Investing.com -- Central bank decisions will be front and center in what’s set to be an action-packed week as investors attempt to gauge how close the Federal Reserve is to cutting rates. The Bank of Japan appears to be shaping up to exit negative interest rates after months of anticipation. Meanwhile, AI darling Nvidia (NASDAQ:NVDA) is to hold a closely watched developer conference. Here’s what you need to know to start your week.

  1. Federal Reserve meeting

Last week’s hotter-than-expected U.S. producer and consumer price data prompted traders to rein in bets on future cuts from the Fed.

All eyes are now on Wednesday’s Fed meeting and any clues on the central bank's outlook for rate cuts, the resilience of the U.S. economy and the possibility of an inflationary rebound.

Earlier this month Fed Chair Jerome Powell said officials have “gained greater confidence that inflation is moving sustainably” toward the central bank’s 2% goal but added that they want more evidence that inflation is slowing before they begin easing.

“We think that the Fed is still likely to ease at mid-year (June or July), but the FOMC meeting will keep us squarely in the wait-and-see period by another one or two meeting cycles, with Jay Powell repeating that he needs a “little bit more” evidence that disinflation is sustainable before he would cut the Fed Funds rate target” analysts at Macquarie said in a note.

  1. BOJ

Tuesday’s BOJ meeting could be one of the most consequential in years with officials set to decide whether to end eight years of negative interest rates in what would mark a landmark shift away from its huge stimulus program.

Japan’s Nikkei newspaper reported Saturday that the BOJ is expected to end its negative interest rate policy this week after the countries biggest companies agreed with labour unions to raise wages by the largest amount in 33 years in annual wage negotiations.

The BOJ began coordinating both within and outside the bank Friday on ending its negative interest rate policy, the report said.

With an end to negative rates seen as nearly a done deal, the market's attention is shifting to any clues the BOJ could give on the pace of any interest rate hikes thereafter.

  1. Bank of England

The BoE will likely play for time in Thursday's rate announcement as it awaits greater clarity on wage growth, which remains stronger than in the U.S. or the euro zone. 

Markets are currently expecting the BoE to start cutting borrowing costs from 5.25% - the highest since 2008 - in August, after both the Fed and the European Central Bank.

Investors will be on the lookout for any change in language about putting the BoE's Bank Rate "under review" and any shift in the balance of votes after February's three-ways split. And Wednesday's inflation reading could cause a last-minute rethink.

  1. Nvidia developer conference

The Nvidia GTC developer conference due to get underway on Monday will be watched closely for AI-related announcements with investors undoubtedly keen to hear announcements that will sustain the mammoth rally in its stock.

CEO Jensen Huang will deliver the keynote address and may offer attendees a first look at its newest products, including its next generation B100 GPU for AI and high-performance computing applications.

Nvidia’s gains for the year to date have already added $1 trillion to the company’s market valuation, catapulting it into a position as the top-performing stock in the S&P 500 Index, but the stock has seen some volatility since a record high close on March 7.

  1. Oil prices

Oil prices dipped on Friday, a day after topping $85 a barrel for the first time since November, but prices finished more than 3% higher for the week on rising demand from U.S. refiners completing planned overhauls.

In the coming week energy traders will be looking to Wednesday’s Fed meeting as cuts in interest rates are seen as opportunity for demand growth in the United States.

Oil prices were boosted after the International Energy Agency on Thursday raised its view on 2024 oil demand for a fourth time since November as Houthi attacks have disrupted Red Sea shipping.

The gains came despite the U.S. dollar strengthening at its fastest pace in eight weeks. A stronger dollar makes crude more expensive for users of other currencies.

--Reuters contributed to this report

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