A total of four events and macro data releases in the next two and a half weeks could determine the direction of the world’s stock markets.
The following two and a half weeks can determine the direction of the US stock market and, at the same time, the direction of market development in other parts of the world.
News agency Bloomberg says that the two macro figures and two central bank events to be released within the next few weeks will be decisive in whether the stock market recovery falters or whether the US market picks up after a weak February.
For example, the world’s most followed stock index S&P 500 rose by almost 6.2 percent in January. In February, the index fell by 2.6 percent. During the entire first year, the S&P 500 has risen by 5.4 percent.
An avalanche of events begins on Tuesday, when the head of the US central bank, the Fed Jerome Powell is for the country’s congress to hear about monetary policy. It is an annual event.
Investors are watching the two-day event closely, looking for clues about the central bank’s policy rate hike path. The CEO is expected to comment at least on recent macro figures on inflation and employment as well as wage pressures.
“Investors are hanging on to every positive word that Powell says,” said a partner at the American investment company Bowersock Capital Emily Hill For Bloomberg.
On Friday it’s time for the “super hot” February employment report of the United States, as the Swedish bank SEB traditionally invites investors to closely follow the announcement.
The Fed is monitoring labor market developments as it assesses the impact of previous interest rate hikes on the overheated economy.
A staggering 517,000 new jobs outside of agriculture were created in the US economy in January. Economists expect the figure to have dropped to 215,000 jobs in February.
The unemployment rate was 3.4 percent in January, the lowest in 50 years. It is expected to have remained as strong in February as in January.
“The labor market situation is expected to remain strong. The growth of average hourly earnings will continue to moderate, which is welcome news for the central bank Fed,” Nordea bank assessed in its morning review on Monday.
There are thus mixed messages in the US economy. A strong jobs report could dash hopes that the Fed will continue to slow its pace of rate hikes.
“If the federal government is at full employment, but price stability has been shaken, i.e. inflation is above the targets, the central bank must tighten”, says the chief strategist of Index Asset Management Tuukka Kemppainen in his review on Friday.
Next on Tuesday of the week, the US inflation figures from February, which are decisive for the Fed’s monetary policy, are coming.
Consumer prices in the United States rose by 6.4 percent in January. Although inflation is expected to have eased to 6.0% in February, any sign of persistent inflation could prompt the Fed to raise its key interest rates more than expected.
In the United States, both inflation and core inflation, closely monitored by central banks, have calmed down a bit from the worst peaks in recent times.
Annual inflation peaked at 9.1 percent in June. Core inflation adjusted for the effect of food and energy, on the other hand, was 6.6 percent higher in September compared to a year ago. In January, core inflation was 5.6 percent.
Investors the hectic weeks will culminate in the interest rate decision at the US Federal Reserve’s monetary policy meeting two and a half weeks from now on Wednesday, March 22.
At the same time, the Central Bank announces its quarterly interest rate forecast. After this, investors should have at least some idea of when the central bank will stop tightening its monetary policy.
According to Bloomberg, the market is pricing in the Fed’s key interest rate reaching its peak of 5.4 percent in September. The interest rate is currently in the range of 4.50–4.75 percent.
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