These days will see the gathering of high-ranking Chinese Communist Party members, who are expected to approve another term for President Xi Jinping.

The Federal Reserve may be testing its view that price pressures in the United States are temporary. Trade data, and Q3 earnings from more companies will reveal if supply-chain problems are worsening.

1 PARTY TIME

A gathering https://reut.rs/3bExDCT of China’s Communist Party in Beijing is expected to pass a historical resolution laying the foundation for President Xi https://www.reuters.com/world/china/chinas-xi-cement-authority-legacy-communist-party-resolution-2021-11-02 to serve an unprecedented third term.

In 1945, Mao Zedong was made the supreme leader. The second resolution in 1981 laid the foundation for Deng Xioaping’s reform era.

This could indicate that Xi is on the right track, and will lead to common prosperity instead of growth at any cost. Unlikely to be mentioned is the precarity of the moment https://reut.rs/3nUCYvv, with China’s growth engines sputtering and credit markets crumbling just as global monetary policy is in flux — caveat emptor.

2. PRICE GAUGING

    The U.S. consumer price index out on Wednesday, is forecast to have climbed 0.5% in October after a 0.4% rise in September as Americans paid more https://reut.rs/3wif94l for food, rent and other goods.

We will have to wait and see if this current price increase is temporary, a result from the economic recovery following the pandemic, o if it signals the beginning of a new upward trend.

The Federal Reserve’s latest meeting https://news.yahoo.com/bond-buying-taper-bag-fed-051422149.html held to the belief that high inflation would prove “transitory” though it acknowledged that global supply difficulties https://reut.rs/3BIJgmD add to inflation risks.

Without triggering an “inflation panic”, it has been able to reveal a tapering off monthly bond buys. It could alter that with a stronger inflation print which renews talk of rate hikes.

3 TRADE CROSSROADS

The rise in consumer demand has fueled the trade recovery. The exports of emerging countries, including raw materials and semiconductors have risen. Shortages and price rises https://www.reuters.com/business/few-options-g7-trade-chiefs-alleviate-supply-pinch-2021-10-21 have ensued.

But trade may now be at a crossroads https://www.reuters.com/business/global-markets-supply-pix-2021-11-03. According to economists, post-COVID normality should allow Western consumers less money on goods and more time for travel and eating out. In early 2022, this could lead to inventories rising and cooling the goods trade.

Data on Sunday https://www.nasdaq.com/articles/poll-chinas-oct-exports-likely-remain-strong-on-robust-global-demand-imports-surge-2021-11 showed Chinese export growth slowed https://reut.rs/3BWYHYF in October but beat forecasts helped by booming global demand ahead of the winter holiday season and an easing power crunch.

A U.S. export slump has blown its trade deficit https://www.reuters.com/business/us-trade-deficit-jumps-record-high-september-2021-11-04 to record highs, so Tuesday’s German data will be watched after August export volumes fell for the first time in 15 months. Finally, Monday may show semiconductor powerhouse Taiwan https://www.reuters.com/business/cop/taiwan-october-exports-set-rise-16th-straight-month-2021-11-03 posting a 16th month of export growth.

4./ BEAT IS ON

European blue-chips that report next week include financials allianz (DE) Aviva (LON:), and Zurich Insurance.

European stocks have never been higher https://reut.rs/3whPIA7 and the latest slew of earnings could prove a catalyst for fresh peaks. The expectation for Q3 profit growth has risen to 57.2% from 47.6% just two weeks ago. Nearly 66% have exceeded expectations so far.

The fear of missing out on the post COVID-19 recovery and negative “real” bond yields help explain stock markets’ resilience https://www.reuters.com/business/global-markets-bonds-analysis-2021-10-29. How long will this party go on? The COVID-19 2020 economic recession has slowed the recovery of pent-up profits, so the party may end soon.     

5/ HIKES ON or OFF

Investors shifting between risk-on and risk-off are common causes of market shake-ups. Mixing things up is the rises-on/hikes-off mindset.

One day, it’s about major central banks hiking rates soon (sell bonds, buy bank stocks) and the next, it’s about them putting off tightening https://reut.rs/3nWpAXB for as long as possible (buy bonds, send stocks to new record highs).

The latter view currently dominates after the biggest central banks pushed back https://www.nasdaq.com/articles/feds-powell-and-ecbs-lagarde-to-markets%3A-hold-your-rate-hike-horses-2021-11-04 against aggressive rate-hike bets. The Bank of England just defied rate-hike expectations https://reut.rs/3BKmevR by keeping policy unchanged.

However, there is still uncertainty about the rate outlook. The swing between ‘hikes-on’ and hikes-off’ days could be the norm. Expect more volatility.