The commencement of the earnings season, meetings of b central banks, and the release of PMI data at the beginning of the year will all reflect how the world economy is

Earnings

The earnings season is heating up, and investors are anticipating major names like Netflix, which reports on Tuesday, Tesla, which reports on Wednesday, and 3M and Intel.

Driven by a surge in chipmakers and other large tech firms, the S&P 500 closed at a record high on Friday for the first time in two years. However, if earnings reports over the next weeks don't support relatively lofty valuations, the enthusiasm may wane.

According to Interactive Brokers Chief Strategist Steve Sosnick, "this new record level of the S&P 500 is sustainable as long as earnings meet expectations," as reported by Reuters.

With ASML, Logitech, and SAP reporting, along with luxury giant LVMH, this is also expected to be a significant week for European technology.

US Data

Some officials have retracted their bets on rate cuts, despite the fact that decreasing inflation has increased expectations that the Federal Reserve would begin lowering rates this year. For new information on the trajectory of interest rates going forward, a significant US inflation number on Thursday will be eagerly observed.

The price index rose 2.6% in the 12 months leading up to November, while monthly prices experienced their first decline in over three and a half years. These developments precede the release of December's data on personal consumption expenditures.

On Wednesday, the government will reveal statistics on the fourth quarter GDP, which is predicted to climb by 4.9% in the previous quarter to 2.0%.

The Federal Reserve will observe its usual blackout period from January 30 to January 31 in advance of its next policy meeting.

Bank Meetings

The markets are pricing in five rate cuts this year, so the European Central Bank will convene its first policy meeting of 2024 on Thursday under a backdrop of rate reduction speculation.

Although President Christine Lagarde has cautioned that pricing too many cuts would not help the bank battle inflation, some policymakers believe the markets are getting ahead of themselves.

Tuesday marks the end of the Bank of Japan's most recent policy meeting. While investors are waiting for any signs of a potential withdrawal from negative interest rates later in the year, the markets are not anticipating any changes.

For the fourth consecutive meeting, the Bank of Canada is anticipated to maintain interest rates at 5% on Wednesday.

PMIs

A "soft landing" for the world economy and decreased interest rates later this year are major bets made by investors.

The flash PPI readings for the US, UK, and Eurozone on Wednesday will provide an indication of how business activity has held up at the beginning of the year despite the fact that much of the world is still in recession territory.

Since new orders and employment plans are two of the more forward-looking components, they will be scrutinised. Everywhere new orders are trending lower, which is frequently an indication that businesses are bracing for difficult times to come - contrary to the optimistic view in financial markets.

(Sources: investing.com, reuters.com)