By Noreen Burke
Investing.com – US inflation data on Thursday may bring some insight into when the Federal Reserve may begin to slow the pace of rate hikes. The results of the US midterm elections on Tuesday, where the control of Congress at stake will also be in focus. China will release trade and inflation data as Beijing’s zero-COVID policy continues to wreak havoc on the economy. Meanwhile, the UK will release GDP data on Friday which is expected to show the economy has entered recession. Here’s what you need to know to start your week.
- US inflation data
The US will release inflation figures for October on Thursday with market watchers on the lookout for indications that price pressures are cooling after a barrage of outsize rate hikes by the Fed.
Fed Chairman Jerome Powell said last week that policymakers will likely take rates higher than envisioned in their efforts to curb soaring inflation, so a hotter-than-expected reading will likely cement expectations for the Fed to continue its hawkish path.
But a cooler-than-expected reading could see the market become more focused on the possibility of a high recession.
Economists expect the annual inflation rate to come in and the monthly inflation rate to rise by.
- US midterm elections
The US is gearing up for midterm elections on Tuesday where control of Congress and President Joe Biden’s agenda for the remainder of his two-year term are at stake.
Republicans have been leading the polls and many analysts believe the likely outcome will be a split government, with the GOP in control of the House and possibly the Senate for the second half of Biden’s term.
Democrats’ electoral hopes have been hammered by voters’ concerns about high inflation, and Biden’s public approval rating has remained below 50% for more than a year, down to 40% in a recent Reuters/Ipsos poll.
Wall Street rebounded on Friday to close out a soft week, but the struggling equities rally will be tested in the coming days by the double-whammy of inflation data and US midterms.
Despite Friday’s gains, which fell 1.39% for the week to snap a four-week winning streak, which shed 3.34% for the week and fell 5.65%, the biggest weekly decline since January.
Inflation data has driven big market moves this year, as persistently high readings forced investors to ramp up expectations for the Fed.
Analysts said the surprise win by the Democrats could fuel concerns over fiscal spending and the inflation outlook.
According to Reuters data, US stocks have fared better during periods of divided government, with the average annual S&P 500 returning 14% in a divided Congress and 13% in a Republican-controlled Congress under a Democratic president, compared with 10% when Democrats controlled it. both the presidency and Congress.
- Chinese data
Chinese and Hong Kong stocks jumped significantly on Friday amid speculation that Beijing could soon ease its strict zero-covid-19 curve, but officials said on Saturday that the country was sticking to its policy.
China will release data on , and in the coming weeks that is expected to point to ongoing weakness in the world’s second largest economy as COVID curbs demand for sap.
Beijing is also due to release data on foreign exchange reserves, which are being depleted as authorities try to shore up the yuan which is on track for its worst year since 1994.
Down for eight consecutive months, China’s foreign currency reserves are within a whisker of the psychological level of $3 trillion amid broad dollar strength since the Fed began raising rates in March.
- UK GDP
Britain will release preliminary data on third-quarter growth on Friday, which is expected to show the economy contracted in the three months to September.
Last Thursday the Bank of England sharply as it tries to combat the risk of inflation running above 10% and warned of a long recession.
The BoE forecasts inflation will hit a high of 40-years around 11% during the current quarter, but that Britain has entered a recession that could potentially last two years – longer than the financial crisis of 2008-09.
–Reuters contributed to this report