©Reuters
By Noreen Burke
Investing.com — The US is set to release closely-watched inflation numbers this week as investors assess whether the Federal Reserve can pause next month’s rate hikes. The Bank of England is expected to hike rates again, China releases more economic data and oil prices continue to struggle.
- inflation numbers
The US is due to release inflation data for April on Wednesday, with economists expecting the core CPI, which excludes volatile food and fuel prices, to rise year-on-year after rising 5.6% a month earlier. The headline inflation rate is expected to increase annually.
That would suggest that pricing pressures are easing, but remain sticky.
The US Federal Reserve made its 10th straight interest rate hike last week, as widely expected, but has indicated it may pause its aggressive tightening campaign at its next meeting in June.
A weaker-than-expected reading would bolster expectations for a Fed rate cut later this year, but a better-than-expected result would suggest the Fed should keep rates high for longer.
Friday’s April jobs report showed that job growth and wage increases remain resilient, undermining fears over the prospect of a recession. Along with the CPI numbers, the economic calendar also includes Thursday’s along with weekly numbers on .
- Sell in May?
The old adage “Sell in May and walk away” refers to the idea that May is the ideal time to start making profits in stocks and stay out of the stock market until after the summer.
It is based on the premise that the best six months of the year for stock market returns are November through April, while the leanest are May through October.
Over the past 50 years, the index has risen by an average of 4.8% between November and April and just 1.2% between May and October, according to Reuters calculations.
However, this pattern fades over a shorter time frame.
Over the past 20 years, November-April outperformance has narrowed to 1% versus May-October. Over 10 years, November-April has lagged behind May-October by 1 percentage point, and by 3 percentage points over the past five years.
- Bank of England
The Bank of England is expected to hike another 25 basis points on Thursday as it continues its fight against inflation.
UK inflation is at 10.1%, significantly higher than the eurozone, exacerbated by rising food costs and Brexit-related tightening of the labor market, keeping wages high.
The combination of high inflation and a tight labor market raises bets of further rate hikes this year, prompting close monitoring of the central bank’s updated projections for growth and inflation.
The day after the BOE decision, the UK releases first-quarter data that should indicate growth has remained weak through the first three months of the year.
- oil price slide
Oil prices rallied on Friday but posted a third straight weekly decline amid ongoing concerns over the demand outlook.
Benchmark ended the week down about 5%, while it was down 7% even after Friday’s recovery. Both benchmarks were down three straight weeks for the first time since November.
Prices received a boost after Friday’s robust US jobs report allayed concerns over the prospect of an economic slowdown.
“Rather than underlying fundamentals, concerns over demand related to recession risks and the strain on the US banking sector drove last week’s selling spree,” said PVM oil market analyst Stephen Brennock.
“The result is that there is a large discrepancy between oil balances and oil prices.”
Analysts at Commerzbank said oil demand concerns were overdone and expect an upward price correction in the coming weeks.
- China data
A series of economic data out of China in the coming week will offer further insights into the uneven post-COVID recovery in the world’s second largest economy.
April trade data will be released on Tuesday and is expected to show a slowdown after rising in March.
April numbers are due Thursday and should show that price pressures are easing.
Last week’s data showed that China’s manufacturing activity contracted unexpectedly in April, adding pressure on policymakers to boost an economy struggling to maintain momentum amid subdued global demand and ongoing weakness in the real estate sector .
Analysts warn that momentum could falter further as domestic consumption has yet to fully recover and that more policy support is needed.
–Reuters contributed to this report
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