Top 5 things to watch in the markets in the coming week

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By Noreen Burke

Investing.com — The earnings season is gathering pace with the four largest U.S. companies by market value among those set to report results in the coming week. The United States is due to release third quarter GDP figures which should show a return to growth after the technical recession in the first half. The European Central Bank is widely expected to deliver another giant rate hike of 75 basis points on Thursday as inflation in the euro zone nears 10%. Political events in the UK will remain in the spotlight as the Conservative Party chooses a new Prime Minister. Meanwhile, investors will be watching delayed economic data from China after President Xi Jinping consolidated power for a historic third term on Sunday. Here’s what you need to know to start your week.

  1. Megacap revenue

The four largest U.S. companies by market capitalization are set to report in the coming week, with investors keen to see how the flagship companies perform amid soaring inflation and the Reserve’s aggressive rate hike path federal government that raised fears about the prospect of a recession.

Microsoft (NASDAQ:) and Alphabet (NASDAQ:) are due to release their report on Tuesday, followed by Amazon (NASDAQ:) and Apple (NASDAQ:) on Thursday.

Because of their high weightings, “if these stocks don’t do that, it puts pressure on the indices to keep falling,” Chuck Carlson, managing director of Horizon Investment Services, told Reuters.

The third quarter earnings season has so far been better than expected after results from companies including Goldman Sachs (NYSE:), Bank of America (NYSE:), Netflix (NASDAQ:) and Johnson & Johnson (NYSE: 🙂 boosted sentiment .

  1. US GDP

The United States is due to release a first look at third-quarter GDP on Thursday, as the economy is expected to have grown at an annualized rate of 100 percent after two straight quarters of contraction in the first half.

The economic calendar also includes data on the Fed’s preferred measure of inflation, the , as well as data on and . Investors will also get data on , , and housing market reports in the form of numbers on and .

Fed policymakers will enter their traditional blackout period before their next meeting on November 1-2, when they are almost certain to raise interest rates by 75 basis points for the fourth straight time.

  1. ECB rate hike

A second rate hike of 75 basis points by Thursday appears to be a done deal despite the looming prospect of a eurozone recession as Russia’s war in Ukraine stokes an energy crisis that is driving up inflation and strikes growth.

With Eurozone inflation nearing 10%, well above the ECB’s 2% target, there is little appetite to slow down now, even as recession risks increase.

Ahead of Thursday’s policy meeting, Monday’s October data will show whether the euro zone slipped further into contractionary territory at the end of the third quarter.

Meanwhile, revised third-quarter GDP figures on Friday are expected to show signs of slowing growth and contraction in .

  1. Political unrest in the UK

This week Britain’s Conservative Party, which holds a large majority in parliament and is not bound to call an election for two years, must choose a new leader to become prime minister – Britain’s fifth in six years.

Former Chancellor Rishi Sunak, Penny Mordaunt and former Prime Minister Boris Johnson are all potential successors to take over from Liz Truss, who stepped down on Thursday after just six weeks.

Truss was knocked down by economic plans that included billions of pounds in unfunded tax cuts that sent sterling and bond markets into a tailspin, forcing the Bank of England to intervene.

The next Prime Minister will inherit an economy in recession, with rising interest rates and double-digit inflation, leaving millions facing a cost of living crisis.

Chancellor Jeremy Hunt, who is expected to remain in office under the new Prime Minister, said on Friday he would do “everything necessary” to reduce public debt before his new budget is announced on October 31.

  1. China

Investors will await the release of delayed Chinese economic data, including third-quarter GDP figures as well as trade, retail sales, industrial production and housing market reports for September.

Strict COVID-19 related restrictions as well as supply chain disruptions caused by the war in Ukraine and slowing global growth due to sharply rising borrowing costs to curb inflation weighed on the world’s second largest economy.

Chinese President Xi Jinping won a precedent-setting third term on Sunday and introduced a top governing body made up of loyalists, with analysts closely watching the implications for economic policy.

–Reuters contributed to this report

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