Finance Market wrap: US inflation, rate hikes among five key things to watch in markets this week

Market wrap: US inflation, rate hikes among five key things to watch in markets this week

markets wrap
The RBA's hawkish pivot has opened the way for a rate hike lift-off as early as next month.
Twitter Facebook Reddit Pinterest Email

US stocks fell by 1.3 per cent last week as US yields surged higher on hawkish central banks and as evidence of Russian atrocities in Ukraine sparked harsher sanctions, driving inflation concerns.

The ASX200 snapped its three-week winning streak to close 0.2 per cent lower at 7478, as the RBA’s hawkish pivot opened the way for rate hike lift-off as early as next month.

Here is a review of the top five things to watch in markets this week.

1. US inflation data

Tonight sees the release of CPI data for March.

The market is braced for another sharp rise in inflation to 8.5 per cent year on year on the back of surging energy prices following the Russian invasion of Ukraine.

Core CPI is also expected to lift from 6.4 per cent to 6.6 per cent on supply constraints.

As oil prices have eased from their March highs in recent weeks, a peak in inflation appears close, easing the need for an aggressive Fed rate hike cycle.

2. RBNZ to hike rates again

At its last meeting in February, the RBNZ hiked the OCR by 25 bp for the third consecutive time to 1 per cent.

A high chance of a 50 bp hike is priced for this week’s meeting.

However, given housing, consumption and business survey data has been weaker of late, it may see the RBNZ opt for a more conservative 25 bp rate hike to 1.25 per cent.

3. ECB to sound more hawkish

The ECB is expected to leave monetary policy on hold.

However, the risks are skewed towards a more hawkish message about the inflation and policy outlook to provide optionality for two 25bp rate hikes before year end.

4. Q1 2022 US earnings season kicks off

Q1 2022 earning season gets under way this week with earnings reports set to drop from US banks, including JP Morgan Chase, Goldman Sachs, Morgan Stanley, Wells Fargo and Citigroup.

US banks reported bumper earnings in 2021 as they unlocked large provisions put aside during the pandemic, and investment arms benefitted from highly active markets.

But the outlook for 2022 is clouded by threats, including the war in Ukraine, surging inflation, and hawkish central banks.

Wall Street forecasts JPMorgan’s EPS will plunge over 39 per cent to $2.73 from $4.50 the year before.

5. AU jobs data for March in lead up to election 2022

The unemployment rate fell to 4.0 per cent in February, the lowest jobless rate since 2008.

This month’s expectations are for a 25k rise in employment, with the unemployment rate falling to 3.9 per cent.

Brought to you by City Index. Access to over 4500 global markets on shares CFDs, Indices, Forex & Crypto with a trusted provider.

All trading carries risk. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.