© © Reuters
By Noreen Burke
GossipMantri.com – This week’s report on US consumer inflation figures will be closely watched after the Federal Reserve’s recent policy shift to adopt medium inflation targeting. The upheaval in the stock markets is expected to continue with the return of traders after the Labor Day holiday in the United States. The European Central Bank will hold its last policy meeting on Thursday amid slowing inflation and a stronger euro. Brexit talks between the European Union and the UK will resume on Tuesday with hopes of a trade deal before the end of 2020 deadline diminishing rapidly. Meanwhile, China’s August trade data will give a better idea of how quickly the recovery from the pandemic is in the world‘s second-largest economy. Here’s what you need to know to start your week.
- US data
U.S. inflation looks unlikely to hit 2% anytime soon, and Friday’s inflation figures for August should show that the core CPI will rise month over month and year over year. ‘other.
The Fed, which is now aiming for an average, has said it won’t worry about inflation going over its 2% target, giving it the flexibility to keep interest rates low for as long as it wants.
Market participants will also watch Thursday’s report for new information on the strength of the labor market recovery after August showed that hiring slowed again last month, with financial aid from the government drying up.
- The technological wreckage should continue
Last week’s stock market shake is expected to continue as traders return to their desks after the Labor Day holiday in the United States on Monday, amid lingering concerns over high valuations and a patchy economic recovery.
After a massive selloff Thursday that continued through Friday, all three major indices gained ground on Friday night to close out the day’s lows well, although trading remained volatile.
Thursday’s sell already reflected investor fears that the valuations of mega-cap tech stocks had overheated and those concerns were exacerbated on Friday when the Financial Times reported that options trading by Japan’s Softbank (OTC) had inflated these actions.
The sale could be a glimpse into the difficult two months ahead, as institutional investors return from summer vacation and focus their attention on potential economic pitfalls in the year ahead.
- ECB meeting
ECB officials will have a lot to discuss on their Thursday after the $ 1.20 hit for the first time since 2018 and the eurozone turned negative in August for the first time since 2016. The slide to deflation is a red flag for the central bank, which targets annual inflation close to 2%, but just below.
Still, it may be premature for the ECB to announce significant new measures on Thursday.
The euro was boosted by a significantly weaker dollar and improved sentiment towards the European Union’s € 750 billion pandemic relief fund. As such, any impact on inflation may be temporary.
But in the longer term, the ECB may be forced to reassess its monetary policy given the Fed’s shift to tolerate higher inflation, which could weigh on the dollar for years to come.
- Brexit and British GDP
Brexit talks between UK and EU negotiators are set to resume in London on Tuesday, but an imminent breakthrough seems unlikely.
Talks are stalled over Britain’s demands on fishing quotas and its desire to use state aid to develop its tech sector.
Britain left the EU on Jan.31, but talks have so far made little progress on reaching a new trade deal for the end of the transition deal on Dec.31. There is less than a month left before the October 2 deadline for a deal. which should then be ratified at an EU summit.
Separately, Friday’s data is expected to show the UK economy again in July, as many foreclosures have been eased over the month.
- Chinese trade data
China’s foreign trade figures on Monday are expected to show a solid increase for a second consecutive month in August, while returning to growth.
Chinese exports have not been hit as hard by the global slowdown as some analysts had feared and are expected to be a key driver of the country’s economic recovery.
Already strong tensions between Washington and Beijing are expected to escalate ahead of the US presidential election in November. China is falling far behind on its pledge to boost purchases of U.S. products under the Phase 1 trade deal that went into effect in February.
–Reuters contributed to this report