Top 5 Things to Watch in Markets Next Week: Earnings Season, Fed Views, PMI Data, UK and China Economic Reports

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The upcoming week is poised to be an eventful one in the financial world, with several major events taking place. First-quarter earnings season for 2023 is now in full swing, and investors are eagerly awaiting the results of several big banks, including Goldman Sachs, Morgan Stanley, and Bank of America, among others. Although analysts expect the S&P 500 earnings to have declined 4.8% in the first quarter from the year-ago period, they are hopeful that low expectations will keep stocks stable following the release of results. While the recent earnings of JPMorgan, Citigroup, and Wells Fargo have been promising, it remains to be seen whether this trend will continue for other banks.

Another significant event taking place this week is the final chance for Federal Reserve policymakers to voice their opinions ahead of next month's policy meeting. Most investors anticipate the Fed will raise rates another 25 basis points despite acknowledging the increased risk of a recession later this year after recent turmoil in the financial sector. New York Fed President John Williams, Governor Michelle Bowman, Governor Christopher Waller, and Governor Lisa Cook are among the Fed officials set to speak in the next few days before the traditional blackout period begins.

The Eurozone, the U.S., and the U.K. are all set to release PMI data, which could indicate whether the recent turmoil in the banking sector is already affecting economic growth. With the International Monetary Fund having recently cut its global growth forecast, market watchers will be on the lookout for signs of slowing growth and the speed at which it is occurring. This is becoming a significant driver for markets as central banks approach the end of their tightening cycles, and many are betting on the Fed cutting rates by year-end.

The U.K. is set to release February employment data and March inflation data this week, which could determine whether Bank of England officials decide to hike interest rates by another 25 basis points at their meeting next month. Although the economy has managed to avoid a recession, growth has stagnated over the past year, and inflation remains high. Markets are anticipating the BoE will hike interest rates next month, which would be its twelfth consecutive rate increase since December 2021.

Finally, China is set to release a flurry of economic data, including reports on first-quarter gross domestic product, March retail sales, and industrial production. Market participants are hoping for more clarity on the uneven recovery in the world’s second-largest economy, particularly since inflation remains subdued as the consumer and industrial sectors struggle to recover in the wake of the hit from harsh pandemic-era restrictions. Policymakers in China have pledged to step up support for the economy, which recorded one of its worst performances in nearly half a century last year due to the strict COVID-19 curbs.

In conclusion, the week ahead is packed with events that are likely to impact the global economy and financial markets. While investors are optimistic about the current earnings season, they remain cautious due to the potential for a recession and the possibility of slower economic growth. As policymakers around the world continue to navigate these challenges, market watchers will be paying close attention to any new developments that could affect their investments.

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