© Reuters. FILE PHOTO: An NYPD car blocks the entrance of 50th Street next to Radio City Music Hall as pedestrians walk around to see local attractions while the Christmas spirit hits New York City , New York, USA, December 5, 2021. REUTERS / Eduardo Munoz
LONDON (Reuters) – Inflation is in the lead for struggling capital markets as central banks begin cutting lending rates.
That puts Tuesday’s US inflation data on the must-watch list. Haruhiko Kuroda’s replacement as the next head of the Bank of Japan (BOJ) is also in the spotlight with government nominations likely to follow soon, while a flurry of Kingdom data He’s about to expire.
Meanwhile, in earthquake-stricken Turkey, when a severe humanitarian crisis causes great concern, there is also the feeling that disaster could dominate one of the most popular elections. important election in 2023.
Here’s an overview of next week’s markets from Kevin Buckland in Tokyo, Amanda Cooper, Naomi Rovnick and Karin Strohecker in London and Ira Iosebashvili in New York.
1/ Inflation BET
The unexpectedly strong January jobs data from the US forced the market to rethink the view that interest rates will soon peak. Now, Tuesday’s latest inflation numbers are the next big test of how the Federal Reserve will apply interest rates in the coming months.
After rising to a multi-decade high last year, inflation has been below expectations for three straight months, driven by the Fed’s most aggressive interest rate hike since the 1980s.
Economists expect headline inflation to rise 0.5% in January after falling 0.1% in December.
The stock market is confident that the Fed can lower inflation without drastically slowing growth.
A strong inflation print could spark a rethink of whether the Fed will actually cut rates later in the year – potentially damaging the recovery momentum that has boosted stocks and bonds later. price drop last year.
2/ MR BOJ
The Japanese government is set to nominate a dark horse candidate to replace Haruhiko Kuroda, who will soon end his decade as head of the Bank of Japan.
Vice Governor Masayoshi Amamiya is the choice of the press and economists, but a report on Friday suggested that Kazuo Ueda, a 71-year-old scholar and former member of the BOJ policy committee, would be nominated.
The yen strengthens according to the report, a curved ball for the market betting on Amamiya, known as “Mr. BOJ” for pushing unconventional monetary policies, will take over.
According to Nikkei, Amamiya turned down the top job when approached.
The market is watching closely. After all, the future of extremely loose monetary policy is at stake, which many suspect will likely change as inflation moves higher.
3/ JUST HOT AIR?
The harsh US reaction to China’s so-called “spy balloons” in early February could be a negative for one of this year’s most popular deals.
Chinese stocks and the offshore yuan have become popular with investors as Beijing eases COVID restrictions that have slowed growth in the world’s No. the lowest levels recorded last year.
US President Joe Biden has vowed to “defend” the country from “threats” from China, following pressure from Republican lawmakers to get tougher on Beijing.
US-China tensions are not new, but they have been strained since former White House Speaker Nancy Pelosi visited Taiwan last year. And nearly a year since Russia invaded Ukraine, investors know that geopolitical risks should not be ignored.
4/ CANNOT BUY LOVE
Give some Valentine’s Day love to UK consumers.
Wednesday’s January inflation report could show double-digit price gains, meaning there’s no respite on the interest rate front yet.
With inflation-adjusted wages falling the fastest since 2009, retail sales in December – a time when people tend to splurge – fell the most that month in at least 25 years.
Retail sales data for the Friday of January won’t be much nicer. Consumers are definitely borrowing. Latest data shows credit card lending activity is at its highest since 2020, but that spending isn’t on home purchases – mortgage approvals were at their lowest in 2009 – or shopping. at stores.
With grocery price inflation near 17% and energy bills on track to grow 20% this year, food and heating could be where any excess money goes. – not a good sign for the only G7 economy that the IMF expects to shrink this year.
5/ FILTER
There is global concern for Turkey and neighboring Syria, where an earthquake has led to a humanitarian disaster with the death toll reaching 21,000.
It is also widely acknowledged that President Tayyip Erdogan’s handling of the crisis could dominate the upcoming elections in May, with the rush to save lives passing a poll expected to defined by soaring inflation and regional security.
Turkey’s 2002 elections – three years after a magnitude 7.6 earthquake near Istanbul killed nearly 18,000 people – saw the then-coalition government unequivocally overthrown by election. Tri viewed the disaster and their subsequent financial crisis response as poor.
As the struggle for safe life continues, presidential and parliamentary elections – perhaps the most important in the republic’s centuries-long history – will decide whether Mr. enter its third decade in power.
