Investors will be mostly focused on U.S. inflation dad while they wait for more clarification regarding the Fed's future interest rate policy

US Inflation Data

Investors will be eagerly observing the U.S. on Thursday for the release of the most recent consumer price index statistics, and then the producer prices report the following day.

There has been speculation that the Fed may start lowering interest rates as early as March due to a slowdown in inflation.

In the latter weeks of 2023, hopes for a rapid rate of easing had set off a furious surge that brought the S&P 500 to within 1% of its all-time high. However, investors have become more cautious since the beginning of 2024 as they have sought further information on the timing and pace of rate decreases.

The U.S. economy added more jobs than anticipated in Friday's employment data for December, which dashed hopes for a quick rate reduction. However, a different report that showed the service sector's activity slowing down last month raised optimism for quick easing.

Earnings season begins

Major American banks begin the earnings season on Friday when JPMorgan, Bank of America, and Citigroup are scheduled to release their fourth-quarter and annual results.

As the Fed hiked interest rates in 2023, top lenders saw an increase in interest income, which helped banks make up for a prolonged decline in dealmaking revenue in Wall Street divisions.

Customers are also a priority. Although household finances have mostly recovered since the epidemic, a growing number of consumers, especially those with lower incomes, are beginning to fall behind on payments.

The high expectations for corporate profits will be put to the test during earnings season. LSEG data quoted by Reuters indicates that analysts anticipate an 11% increase in S&P 500 earnings in 2024, following only a 3% increase in 2023.

UK Data

On Friday, the United Kingdom will disclose its November GDP figures. Economists anticipate a little increase following October's dip, which was caused by an exceptionally big reduction in manufacturing output.

Following a 15-year peak in borrowing costs and rising inflation, firms and individuals may just be able to avoid a recession, according to data released on Friday that showed a recovery in the activity of Britain's service sector in December.

Business leaders are calling on the Bank of England to lower interest rates because they are concerned about the state of the economy. A May interest rate cut is already factored in by investors.

Israel-Hamas conflict

Market observers have been observing oil prices for clues about whether the battle between Israel and Hamas would cause global inflation to rise; however, oil does not tell the entire picture because of forecasts of increased supply.

Retailers are facing the worst shipping disruption since Covid-19 crippled the freight business in 2020 as transport companies divert vessels from the Red Sea.

Trade analysts predict that as a result, Western merchants may have to wait longer for Chinese products to arrive, driving up costs. According to the British Retail Consortium, cost increases may undo the trend of decreasing inflation of supermarket prices.

(Sources: investing.com, reuters.com)