Investing.com - Trade-related headlines will continue to drive market sentiment in the week ahead, as the U.S. looks set to activate 25% tariffs on $34 billion in Chinese goods on Friday. China plans to retaliate with tariffs of its own on U.S. goods and agriculture.
The latest back-and-forth measures have sparked concerns that Washington and Beijing have entered into a full-blown trade war that could damage global growth.
Besides trade, the monthly jobs report on Friday is the big event for the market, which will not be open Wednesday due to the Fourth of July holiday.
There is also the release of the minutes from the Federal Reserve's last meeting on Thursday.
Elsewhere, in what will be a quiet week for European economic data, the less attention-grabbing release of German industrial production could offer a better indication of the headwinds facing the European Union and its largest economy.
In the UK, investors will focus on a report on activity in the dominant services sector for further hints on the likelihood of the Bank of England raising interest rates next month.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. U.S.-China Trade Worries
U.S. tariffs on $34 billion of Chinese goods are scheduled to take effect on Friday, as the Trump administration tries to reduce the trade deficit and protect intellectual property rights.
Beijing plans to retaliate the same day with its own duties on $34 billion worth of U.S. goods, including the politically sensitive areas of agriculture products and automobiles.
Washington and Beijing appeared increasingly headed toward open trade conflict after several rounds of negotiations failed to resolve U.S. complaints over Chinese industrial policies, lack of market access in China and a $375 billion U.S. trade deficit.
Recent market action has suggested that so far China has been the big loser from the escalating trade conflict between the world's two largest economies - China's Shanghai composite plunged 8% in June, while the Chinese yuan suffered its worst month on record, losing 3% against the dollar in June (USD/CNY).
2. U.S. Jobs Report
The U.S. Labor Department will release the nonfarm payrolls report for June at 8:30AM ET on Friday, and it will be watched more for what it says about wages than hiring.
The consensus forecast is that the data will show jobs growth of 195,000, after adding 223,000 positions in May, while the unemployment rate is seen at 3.8%, matching the near 18-year low hit in May.
However, most of the focus will likely be on average hourly earnings figures, which are expected to rise 0.3%, the same gain reported a month earlier.
On an annualized basis, wages are forecast to increase 2.8%, a tad faster than the 2.7% gain in May.
This week's holiday-shortened calendar also features the ISM manufacturing survey on Monday, followed by a report on monthly vehicle sales on Tuesday, and the ISM's reading on service sector activity on Thursday.
3. Fed FOMC Meeting Minutes
The Federal Reserve will release minutes of its most recent policy meeting on Thursday at 2:00PM ET.
The U.S. central bank raised interest rates as widely expected following its meeting on June 13 - its second rate increase of the year - and took a slightly more hawkish policy tone in signaling two additional rate hikes by year-end.
Fed Chairman Jerome Powell said recently that the case for continued gradual rate hikes remains strong, signaling that borrowing costs will continue to climb this year despite the recent market volatility caused by the trade dispute.
Traders are currently pricing in around a 75% chance of a third rate hike in September, according to Investing.com’s Fed Rate Monitor Tool. Odds of a fourth rate hike by December was seen at about 45%.
4. German Industrial Production
Germany is to release May industrial production figures at 0600GMT (2:00AM ET) on Friday, amid expectations for an increase of 0.4%, snapping back from a drop of 1.0% in April.
German industrial production has declined four months in a row as growing uncertainty about global trade led companies to scale back investment plans, adding stress on Germany's export-oriented economy.
Politics will also be in focus. German Chancellor Angela Merkel's political future rests in the hands of the Christian Social Union (CSU), when the Bavarian party's leadership meets on Sunday to decide whether to accept migration deals she brought back from Brussels.
At a summit last week, leaders hammered out a deal to share out refugees on a voluntary basis and create "controlled centers" inside the European Union to process asylum requests.
5. UK Services PMI
A survey on Britain's giant services sector due at 0830GMT (4:30AM ET) on Wednesday is forecast to dip slightly to 53.9 from the previous month's reading of 54.0.
Separate PMIs for the manufacturing and construction industries are due on Monday and Tuesday respectively.
First-quarter economic growth was revised up, official data showed on Friday, renewing investor expectations for a Bank of England rate hike this year.
Interest rate futures raised the implicit probability of an August rate rise by the BoE to 60% from 50%.
Stay up-to-date on all of this week's economic events by visiting: http://www.investing.com/economic-calendar/