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Top 5 Things to Watch in Markets in the Week Ahead By


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By Noreen Burke — The Federal Reserve meeting will be the highlight of the coming week and while no change is expected officials are likely to hint that they are moving closer to scaling back stimulus measures. Aside from the Fed meeting the U.S.’s economic calendar is sparse with only updates on earnings and information about the housing sector. In the coming week, several other central banks including the Bank of Japan will hold meetings. Evergrande, the Chinese property developer and embattled, faces default on its debts. It is provoking fears about contagion to other Chinese markets. Here’s what you need to know to start your week.

  1. Federal Reserve meeting

The Fed will begin its two-day policy meeting starting Tuesday ahead of its policy announcement on Wednesday afternoon and investors will be on the lookout for any details of the central bank’s plans to start paring back its $120 billion a month emergency stimulus program.

The Fed’s timeline for scaling back economic stimulus is important as it represents a first step towards eventual interest rate hikes.

Many Fed officials suggested that tapering should be initiated this year. Fed Chair Jerome Powell could echo the view, though he stressed that an increase in rates is not yet possible.

A weak employment report and rising COVID-19 numbers may cause economic uncertainty for the Fed to keep a prudent approach.

  1. Economic data

The U.S. data calendar for the week ahead is centered around housing figures, which are set to stabilize after a slight uptick in mortgage approvals for home purchases in recent weeks.

On Tuesday data will be available on building permits and housing starts. The Wednesday data report will include figures on existing home sales and Friday data on new home sales.

Market watchers will also be looking at Thursday’s report on initial jobless claims amid concerns over the hit to the economic recovery in the current quarter from the spread of the Delta coronavirus variant, especially among people who are hesitant to take vaccines.

  1. Stock markets

Wednesday’s Fed policy announcement will be the main directional driver for equity markets in the coming week.

Concerns over Fed tapering could lead to tighter monetary policies. However, the equity market is being affected by concerns that the Delta version of the Fed policy announcement will likely slow economic growth. There are also the possibility of tax increases for corporations.

September, traditionally a weak month for the stock market, has so far seen the slip almost 2%.

Investors will also be watching a handful of earnings with FedEx (NYSE:), General Mills (NYSE:), Nike (NYSE:) and Costco (NASDAQ:) all on the docket.

After BTIG’s downgrade on supply chain issues, Nike shares suffered a small loss last week.

  1. Central bank meetings

Besides the Fed, several other major global central banks are also holding meetings in the coming days.

While the Bank of Japan will meet on Tuesday and Wednesday as well, there is a general consensus that it will keep its policy stable but warn of increasing risks for exports from disruptions to their supply.

Norway’s central banks will be raising rates to 0.2% on Thursday. It is likely to raise the main 0% rate.

Although the Bank of England will not likely change its policy on Thursday, it may signal that they still consider inflation to be transitory.

  1. Crunch time for Evergrande

Indebted Chinese property developer Evergrande has a bond interest payment of $83.5 million due on Thursday, with investors pricing in a high likelihood of default.

This tiny sum could prove to be the turning point in a $255 billion company with over 1,300 properties across China. It also shows just how dire things have gotten.

China’s second-largest developer is trying to raise funds with fire sales of apartments and stake sale in its vast business network. However, it has had little success.

Concerns that Evergrande could default on its debts is spilling over into China’s financial markets and even risks contagion that could spread to markets beyond China.

Report by Reuters