©Reuters
By Noreen Burke
Investing.com — US data will shed more light on the future direction of interest rates, while megacap gains will test this year’s rally in tech stocks. European bank earnings will show the impact of last month’s banking crisis, euro-zone data will inform ECB decision-making and the new BOJ governor chairs his first monetary policy meeting.
- US data
Investors are trying to gauge whether the US Federal Reserve will raise interest rates further to fight inflation after a broad 25 basis point hike at its May policy meeting. Many expect the central bank to cut interest rates later this year to ease the impact of higher borrowing costs on the economy.
Thursday’s numbers will be closely watched along with the Fed’s preferred measure of inflation, the PCE core price index and the , both due Friday.
GDP data is expected to point to solid growth while consumer spending remains strong. While the headline is expected to fall, the reading is expected to remain elevated. The employment cost index should also tick higher in line with still persistent inflation.
The economic calendar also includes reports on , , and , , and .
- Megacap Earnings
Earnings results from some of the biggest names in the tech sector are set to be released in the coming week, which will be a key test for the markets as investors await whether the strong gains in the tech sector so far this year are justified.
Three of the four largest U.S. companies by market value — Microsoft (NASDAQ:), Google parent Alphabet (NASDAQ:) and Amazon (NASDAQ:) — are all scheduled to report, with Microsoft and Alphabet coming out on Tuesday, followed by Amazon on Thursday . Meta Platforms, the parent company of Facebook (NASDAQ:), is interposed on Wednesday.
Amazon shares rose 3% on Friday after a market research firm predicted the online retailer’s business in North America would beat Wall Street estimates.
Investors have been drawn to technology and growth stocks this year on the belief that the Fed will soon halt raising rates and that the sector will remain resilient if growth slows. This has helped support stock markets despite worries about the prospect of a recession and last month’s banking crisis sparked by the collapse of Silicon Valley Bank signature bank (OTC:).
- European bank earnings
Some big-name European banks are set to report earnings in the coming week, including UBS (SIX:), Deutsche Bank (ETR:), Santander (BME:) and Barclays (LON:).
The results come after a very turbulent first quarter for banks following the collapse of two regional US lenders last month and the dramatic demise of Credit Suisse (NYSE:) and its hastily arranged takeover by rival UBS.
The episode wiped out nearly $180 billion worth of European banks at one point. Since then, the sector has rallied, but it’s still worth $70 billion less than it was before Silicon Valley collapsed in early March.
Credit Suisse has brought forward its earnings release to Monday, a day before UBS releases its first-quarter results.
- Eurozone GDP
The euro zone is due to release advance data on Friday, while April inflation reports from the region’s largest economies are due on the same day.
Recent economic data has shown that while the bloc’s economy remains resilient, inflation has persisted despite tighter monetary policy.
Strong performance in the eurozone’s dominant service sector could mean wage pressures remain elevated, hampering the European Central Bank’s efforts to bring inflation back to its 2% target.
The ECB is expected to hike rates for a seventh straight session at its upcoming May meeting, with most analysts expecting a 25 basis point hike, although a larger hike hasn’t been ruled out.
- The new BOJ governor takes the helm
New Bank of Japan governor Kazuo Ueda will take his first chair on Friday and while analysts don’t expect any changes to the central bank’s ultra-dovish monetary policy, they are wary of potential surprises.
Ueda is under intense scrutiny as to how he could dissuade the BOJ from the massive stimulus package of the past decade without jeopardizing market stability.
Japanese inflation is beating estimates but comments from Ueda in recent weeks suggest he believes stimulus settings remain reasonable for now.
–Reuters contributed to this report
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