The week ahead will be packed with important events and data that could have a significant impact on the global markets. Here are some of the key things to watch:
1. China’s economic slowdown
China, the world’s second-largest economy, reported on Wednesday that its gross domestic product (GDP) grew by 4.9% year-on-year in the third quarter, down from 6.3% in the previous quarter and below market expectations of 5.2%. The slowdown was mainly due to the impact of the Delta variant of Covid-19, the regulatory crackdown on various sectors, and the debt crisis of property giant Evergrande1. Investors will be closely watching how China’s authorities will respond to the challenges facing the economy and whether they will introduce more stimulus measures to support growth.
2. US earnings season
The third-quarter earnings season in the US is in full swing, with more than 180 companies in the S&P 500 index scheduled to report their results next week. Some of the notable names include Tesla, Microsoft, Apple, Amazon, Facebook, Google, Boeing, McDonald’s, Starbucks, and Exxon Mobil2. The market will be looking for signs of how these companies are coping with the supply chain disruptions, labor shortages, inflation pressures, and rising interest rates that have been weighing on their performance and outlook.
3. Fed policy meeting
The Federal Reserve will hold its two-day policy meeting on Tuesday and Wednesday, followed by a press conference by Chair Jerome Powell. The market expects the Fed to announce its plan to start tapering its monthly bond purchases, which currently amount to $120 billion, as soon as November3. The Fed has signaled that tapering is not a prelude to raising interest rates, which it expects to keep near zero until at least 2023. However, investors will be looking for any clues on how the Fed views the recent surge in inflation and whether it will bring forward its rate hike projections.
4. COP26 climate summit
The 26th UN Climate Change Conference of the Parties (COP26) will kick off on Sunday in Glasgow, Scotland, and last until November 12. The summit will bring together leaders from more than 190 countries, as well as representatives from businesses, civil society, and other stakeholders4. The main goal of the summit is to accelerate action to limit global warming to 1.5 degrees Celsius above pre-industrial levels, as agreed in the 2015 Paris Agreement. The summit will also address issues such as climate finance, adaptation, loss and damage, and carbon markets.
5. Eurozone inflation and GDP
The eurozone will release its preliminary inflation and GDP data for the third quarter on Friday. The inflation rate in the bloc hit a 13-year high of 3.4% in September, well above the European Central Bank’s (ECB) target of close to but below 2%5. The ECB has maintained that the spike in inflation is temporary and largely driven by base effects, energy prices, and supply bottlenecks. However, some analysts have warned that inflation could persist longer than expected and pose a risk to consumer spending and economic recovery. The GDP data will show how the eurozone economy fared in the third quarter amid the easing of Covid-19 restrictions and the vaccination rollout.
The week ahead will be a busy one for market participants, who will have to digest a lot of information and news that could affect their investment decisions. The main themes to watch are China’s economic slowdown, US earnings season, Fed policy meeting, COP26 climate summit, and eurozone inflation and GDP. These events could have implications for global growth, monetary policy, fiscal policy, trade relations, environmental issues, and market sentiment.