The benchmark US stock index, the S&P 500, finished flat last week, consolidating its 25 per cent gain for the year, despite concerns of a fourth wave of COVID-19 in Europe and persistently high inflation readings.
The ASX 200 fell -0.62 per cent to close at 7396, after heavy falls in the influential financial sector, courtesy of Commonwealth Bank of Australia’s earnings miss and concerns about bank profit margins.
Here are the top five factors to watch in markets this week.
1. Federal Reserve chair
US President Joe Biden will decide who will be the next chair of the Federal Reserve this week.
The two candidates are the incumbent Jerome Powell, a known quantity for the market, and Fed Governor Lael Brainard, who is considered a more dovish appointment.
According to surveys, Mr Powell is favoured to receive a second term in the top job.
2. How far will the Reserve Bank of New Zealand raise rates?
The RBNZ will follow up its October rate increase with another increase at its November meeting on Wednesday (noon, Australian time) in response to rising inflation pressures.
Markets are fully priced for a 25 basis-points hike to 0.75 per cent, and there is an almost 50 per cent chance priced that the bank will hike by 50bp to 1.00 per cent.
Either way, additional RBNZ rate hikes are likely in 2022 and 2023, taking the overnight cash rate (OCR) towards 3.00 per cent.
3. Will a European COVID resurgence impact markets?
A COVID-19 resurgence in Europe is bringing new lockdowns and vaccine mandates as hospitalisations rise in some countries.
The benchmark German stockmarket, the Dax, appeared unperturbed to close +3.23 per cent higher last week at fresh all-time highs.
Will the coming week see investors in a more cautious frame of mind?
4. Crude oil to fall further?
The threat of co-ordinated action from the US and China to release oil reserves and new lockdowns in Europe put crude oil into a -6 per cent tailspin last week, its biggest weekly loss since August.
Additional falls this week will bring motorists relief at the bowser and ease inflationary pressures.
5. Bitcoin to regroup?
Bitcoin has slumped by almost 20 per cent just two weeks after reaching a new all-time high at $69,000.
Can the market’s leading cryptocurrency stabilise before a run towards $75,000 into year end?
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