Aug 05, 2022 02:30AM ET
By: AnalysisWatch
Latest U.S. inflation numbers are in markets' sight, especially since Federal Reserve policymakers have come out in force to correct any misconception about their determination to slay decades-high inflation with big rate hikes.
The fallout from Nancy Pelosi's high-profile visit to Taiwan will be watched closely, as will Chinese and UK data while Ukraine is hoping for a debt payment freeze from international investors.
Here's your week ahead in markets from Kevin Buckland in Ottawa, Ira Iosebashvili in New York and Andy Bruce, Karin Strohecker, Dhara Ranasinghe and Vincent Flasseur in London.
Wednesday's July U.S. inflation print is shaping up as a key test for a summer rally in U.S. stocks that has lifted the S&P 500 to multi-week highs.
The benchmark index is up 14% from its mid-June low, supported in part by expectations that the Federal Reserve will be less hawkish than previously anticipated.
Fed officials have pushed back against the idea that they will be less aggressive in a so-called dovish pivot.
Any signs that inflation is not yet peaking after the Fed's 225 bps worth of rate hikes could provide a reality check to markets hopeful of a soft landing for the economy.
Analysts polled by Reuters forecast annual inflation at 8.9% in July versus 9.1% in June, which was the largest increase since 1981.
U.S. House of Representatives Speaker Nancy Pelosi's visit to Taiwan, which China claims as its own territory, means U.S.-China tensions are rising again.
To be fair, the selloff in world stocks and the Taiwan dollar as well as the rush to safe havens such as U.S. Treasuries quickly subsided.
Still, market sensitivity to political risk is high since Russia's invasion of Ukraine in February. China has launched unprecedented live-fire military drills in areas that ring Taiwan following Pelosi's visit. Taiwan says this violates United Nations rules and invades its territorial space.
Scalded by Russia, investment funds have already started to tread carefully in China. No doubt, investors will remain alert to further signs of trouble in the East.