Top 5 things to watch in markets in the week ahead

Investing.com — Friday’s U.S. jobs report for November will be the main highlight of the coming week as investors remain hopeful that the Federal Reserve will soon slow the pace of rate hikes. Remarks by Fed Chair Jerome Powell mid-week will be closely watched. Eurozone inflation data will also be in the spotlight, as will PMI data out of China amid concerns over a resurgence of COVID cases there. Here’s what you need to know to start your week.

Expectations that the Fed may soon slow the pace of its aggressive rate hikes were boosted by last week’s minutes from the central bank’s November meeting. Friday’s U.S. jobs report for November will put those expectations to the test.

Economists are expecting the U.S. economy to have added 200,000 new jobs, in what would be the smallest increase since December 2020.

The jobs report is also expected to show that growth in average hourly earnings is moderating, while the unemployment rate is expected to hold steady just above a five-decade low at 3.7%.

It will be the last nonfarm payrolls report before the Fed’s final meeting of the year in December.

But investors have reason to remain cautious – five of the last six jobs reports have come in better than forecast and another strong reading could spell trouble for U.S. stocks.

Fed Chair Jerome Powell is to discuss the economic outlook during an appearance at the Brookings Institution on Wednesday.

While Powell has indicated that the Fed could shift to smaller rate hikes next month, he has also said rates ultimately may need to go higher than policymakers thought would be needed by next year.

Meanwhile, St. Louis Fed President James Bullard and New York Fed President John Williams are both due to make appearances on Monday.

The economic calendar also features the ISM manufacturing PMI and the Fed’s favored measure of inflation – the core PCE price index – both of which are published on Thursday.

Other reports during the week include ADP nonfarm payrolls, initial jobless claims, consumer confidence and the Fed’s Beige Book.

As Wall Street reopens after the Thanksgiving holiday investors will be focused on how retailers are faring over the holiday shopping period, as well as the Fed’s next steps.

Black Friday sales got underway against a backdrop of persistently high inflation and cooling economic growth. Retailers are offering steep discounts both online and in store, which will likely impact profit margins in the fourth quarter.

Online spending rose by 2.3% to a record $9.12 billion on Black Friday, according to a report by Adobe Analytics on Saturday, but the percentage increase was well below the annual rate of inflation which is currently running at 7.7%.

U.S. retail stocks have become a barometer of consumer confidence as inflation bites. So far this year, the S&P 500 retail index is down a little over 30%, while the S&P 500 has fallen 15%.

While there are tentative signs that inflation in the U.S. may be peaking, Wednesday’s Eurozone inflation data is expected to show that price pressures in the bloc remain strong.

Eurozone CPI hit 10.6% in October, more than five times the European Central Bank’s 2% target.

The ECB raised rates by 75 basis points to 1.5% at its meeting in October, bringing its total hikes to 200 basis points since July for its fastest policy tightening on record.

Last week’s minutes of the ECB’s October meeting showed that while policymakers have been adamant that rates need to increase further to help lower inflation, they cannot fully agree on their ultimate destination or pace.

Market bets are fluctuating between a 50- and a 75-basis-point increase when ECB policymakers next meet on Dec. 15.

As China grapples with a record number of COVID-19 infections and new lockdowns, hopes have dimmed for a reopening of the world’s second-biggest economy in the first quarter of 2023.

PMI data on Wednesday will be closely watched as widespread COVID curbs continue to depress economic activity.

Officials have vowed to continue with virus restrictions despite the growing public pushback and the mounting toll on the economy.

China said on Friday it would cut the amount of cash that banks must hold as reserves for the second time this year, releasing liquidity to prop up a faltering economy.

–Reuters contributed to this report

This post was originally published here.