This week's upcoming inflation data will be in focus. Investors are nervous about when the world's interest rates might begin reduction phase

US Inflation Data

Following October's consumer price inflation reading that remained unchanged, markets are expecting Thursday's U.S. inflation report to strengthen the case against further rate hikes by the Federal Reserve.

The personal consumption expenditures price index, the Fed's preferred inflation measure, is predicted to have increased by 0.1% in November. September's 0.4% increase in the PCE index was consistent with August's increase.

It is anticipated that the core reading, which excludes the cost of fuel and food and is thought to be a more accurate indicator of underlying inflation, will increase by 3.5% from the previous year.

Tuesday's consumer confidence index for November, which showed a third consecutive month of decline in October, is one of the other economic data releases for the week. Along with these, there will be the Fed's Beige Book, the weekly report on jobless claims, the first revision of the third quarter GDP, and October new home sales data.

Eurozone Inflation

On Thursday, the Eurozone is scheduled to release inflation data that is anticipated to indicate a reversal of price pressures in November.

It is anticipated that annual consumer price inflation will rise at a pace of 2.8%, down from 2.9% in the previous month. It's anticipated that underlying inflation will drop to 3.9%.

However, President Christine Lagarde of the European Central Bank has cautioned that borrowing costs will need to remain high for a longer period of time, despite signs that inflation is slowing down.

According to last Thursday's minutes of the ECB's most recent policy meeting, officials concur that they ought to be prepared to raise rates once more if necessary.

Only in the second half of 2025 is inflation expected to reach the ECB's target of 2%.

Equities

Investor expectations for a rally through year-end are being reinforced by indications that the U.S. stock market rally is expanding beyond the Big Seven of mega-cap growth and technology companies.

The last three weeks have seen a sharp increase in equity values, with the S&P 500 rising by roughly 10%. This increase has been fueled by declining Treasury yields and slowing inflation data that may indicate a halt to Federal Reserve rate hikes.

Altogether, the Big Seven account for 28% of the weight in the S&P 500 index. They also account for almost half of the Nasdaq 100's weighting, which has increased by almost 47% so far this year.

China

Investors will be watching China's official purchasing manager indexes for November, which are expected to be released on Thursday, for any indications of a rebound in the country's second-largest economy.

Data from October revealed that factory activity had resumed its downward trend, in spite of a number of government initiatives to support the economy. The economy has been negatively impacted by low consumer spending and a crisis in the nation's heavily indebted real estate sector, which accounts for nearly 25% of the country's gross domestic product.

China's economy expanded at a faster-than-expected rate of 4.9% in the third quarter, but Beijing still has a long way to go before reaching its target of roughly 5% annual growth.

(Sources: investing.com, reuters.com)