Investing.com — Fears of a recession are growing as the Federal Reserve keeps interest rates high, threatening to stifle growth. With a wave of new corporate balance sheets and unpredictable oil prices due to global tensions, markets are set for a turbulent week. Here’s what could move the stock market in the coming days.
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1. Data from the USA, Fed-Speak
After the weak report for July on Friday fueled fears of a recession, the economic calendar for the coming week is significantly sparser.
On Monday, the Institute of Supply Management will publish its , which is expected to show moderate growth.
On Thursday, investors will receive new insight into the state of the labor market with the weekly report.
Investors will also get a glimpse into the thinking of Mary Daly, head of the Federal Reserve Bank of San Francisco, and Thomas Barkin, head of the Federal Reserve Bank of Richmond, after the Federal Reserve left interest rates unchanged last week but opened the door for a rate cut in September.
2. Further quarterly reports
While most large caps have already published their reports, there are still some important balance sheet figures to be released in the coming days.
Earnings from industrial giant Caterpillar (NYSE:) and media and entertainment giant Walt Disney (NYSE:) will provide further insight into the state of manufacturing and consumers. Several healthcare heavyweights will also open their books, including slimming product maker Eli Lilly (NYSE:) and Super Micro Computer (NASDAQ:), which is at the center of the AI hype.
US stock markets suffered a second consecutive day of weak trading on Friday, pushing the stock into correction zone as signs of an economic slowdown fueled fears that the Fed may have waited too long to cut interest rates.
Weak results from Amazon (NASDAQ:) and Intel (NASDAQ:) as well as disappointing outlooks increased the downward pressure.
3. China data
This week, key economic data from China will be released that could shed light on how the economic recovery of the world’s second-largest economy will unfold in the second half of the year.
The week starts with a survey on the private sector. This survey offers a first indication of how the services sector, a central component of the Chinese economy, is developing. The sector has often served as a leading indicator of economic development in the past.
On Wednesday, the will be on the agenda. They show how well China’s exports and imports are doing – an important indicator of the country’s overall economic situation and trading environment.
Things will get particularly exciting towards the end of the week when they are published.
4. Interest rate decision of the Reserve Bank of Australia
The Australian Reserve Bank () will hold its next meeting next Tuesday. Most analysts expect the RBA to keep its key interest rate unchanged. But the tension lies not only in the current interest rate policy, but also in the future direction that the central bank could take.
Last month, economic indicators provided surprises: Core inflation – price increases excluding volatile components such as energy and food – fell to a two-year low in the second quarter. At the same time, GDP figures showed slower economic growth in the first quarter, which makes the situation even more complex.
The uncertainty about what will happen next is reflected in market expectations. Investors currently expect a 70% chance that the RBA will cut interest rates by the end of the year if inflation continues to fall.
5. Oil prices
On Friday, oil prices fell to their lowest level since January. Weak economic data from the US and China, two of the world’s largest oil consumers, are casting a large shadow over demand forecasts.
The US jobs report released on Friday painted a gloomy picture of employment. At the same time, China, the world’s largest oil importer, signaled a decline in manufacturing activity. This combination of factors led to a noticeable drop in oil prices, as markets fear that a weakening economy in both countries could negatively affect global oil consumption.
It is not only economic indicators that determine the direction of oil prices. Geopolitical developments also play a decisive role. In the Middle East, the situation heated up further when the Iranian-backed Lebanese Hezbollah declared that the conflict with Israel had entered a new phase.
Despite the turbulent market situation, the Organization of the Petroleum Exporting Countries (OPEC) and its partner group, known as OPEC+, stuck to their previous production policy last Thursday. No adjustments were made and the plan to roll back some of the previous production cuts from October was not changed.
— Investing.com/Reuters
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