Investing.com -- All eyes will be on the U.S. in the coming week as inflation data is released. GDP data out of the U.K. will show how the economy is holding up in the face of continued rate hikes. Data out of China could point to deflation risks in the world’s number two economy. Here’s what you need to know to start your week.
- U.S. inflation data
The U.S. is to release July inflation data on Thursday which will show whether price pressures are trending down and if markets are correct in believing that the Fed is close to ending its aggressive cycle of interest rate hikes.
Lower numbers would make it more likely that Fed policymakers will hold off raising interest rates at their upcoming September meeting after a quarter-percentage-point hike last month.
On Friday, the U.S. is to release July PPI data, with core producer prices expected to rise by 2.3% from a year earlier.
Investors will also get to hear from several Fed officials during the coming week with Philadelphia Fed President Patrick Harker, Atlanta Fed President Raphael Bostic and Fed Governor Michelle Bowman making appearances.
- Pause in stock market rally
Wall Street closed broadly lower on Friday and weekly percentage declines for the S&P and Nasdaq were the biggest since March as some investors locked in profits after five months of gains.
The near-term trajectory for equities could depend on whether Thursday’s inflation data shows consumer prices moderating. Investors are also closely watching the path of Treasury yields, which rattled markets in recent days by rising to fresh year highs following a downgrade of the U.S. credit rating by Fitch.
Rising yields on Treasuries, viewed as among the world's safest investments because they are backed by the U.S. government, can dampen demand for stocks.
Friday’s U.S. employment data showed that while job growth continued at a moderate pace in July wage growth remained faster than expected, fueling worries that the Fed may keep rates higher for longer.
- U.K. GDP
The U.K. is to release second quarter GDP data on Friday which is expected to tick fractionally higher, indicating that the overall economy remains all but stagnant. In May, it shrank less than expected, having almost stalled in the prior two months.
The Bank of England raised U.K. rates to a 15-year-high of 5.25% last Thursday, its 14th back-to-back increase, and warned that borrowing costs were likely to stay high for some time.
British inflation hit a 41-year high of 11.1% last October and has fallen more slowly than elsewhere, standing at 7.9% in June, the highest of any major economy.
Deputy Governor Ben Broadbent said keeping relatively high rates over an extended period was key for cutting inflation, even as the BoE sees the economy growing only minimally in the coming years.
- China inflation
China is to release trade figures on Tuesday followed by July inflation data on Wednesday, which is expected to show a drop in consumer prices, amid concerns over the outlook for the world’s second largest economy.
China’s economy rebounded strongly in the first quarter after strict pandemic-era curbs were suddenly removed late last year, but the recovery has faltered in recent months as demand at home and abroad weakens.
Authorities have rolled out a series of policy measures in recent weeks to support the flagging recovery, though details have been scant, and investors are expecting more to come.
- Eurozone data
In the Eurozone, Germany is to release data on industrial production on Monday. The report is expected to point to a decline amid a slowdown in global demand, particularly from China.
The German economy stagnated in the second quarter of 2023, missing forecasts for modest growth, as weak purchasing power, higher interest rates and low factory order books all weighed on the euro zone's largest economy.
--Reuters contributed to this report