The week after the U.S. jobs report is usually one of the lightest of the month in terms of economic data and the coming holiday-shortened week will be no exception. Wednesday’s Federal Reserve meeting minutes may give investors an insight into policymakers behind the scenes discussions after a hawkish shift prompted market turbulence last month. The European Central Bank will also publish the minutes of its latest meeting, while China will release what will be closely watched inflation figures. And with markets going into the second half of the year investors are asking whether the stunning first half run can continue. Here is what you need to know to start your week.
The minutes of the Fed’s June meeting, when officials opened talks on tapering bond-buying and indicated interest rate increases could come sooner than previously anticipated, are due to be released on Wednesday.
The minutes are coming on the heels of Friday’s nonfarm payrolls report, which showed that the U.S. created the most jobs in 10 months in June, indicating that the economy closed out the second quarter with strong momentum as the reopening continued.
The robust data did little to ease concerns that a strong recovery and rising wages could prompt the Fed to begin unwinding its easy money policies sooner than expected.
That dynamic looks set to continue to weigh on markets ahead of the Fed’s July policy meeting and its annual meeting in Jackson Hole, Wyoming, in August.
ISM services data
The ISM index of service industry activity is set to be released on Tuesday and is expected to show continued strong growth after hitting a record high in May amid a reopening made possible by vaccinations against the coronavirus. The report could also underline ongoing labor constraints as hiring continues to lag, leading companies to offer higher wages to attract staff.
This theme will likely be echoed by Wednesday’s JOLT - Job Opening and Labor Turnover - report. It is expected to show a new record for job openings, but that hiring continues to lag far behind given potential workers are either unable or unwilling to take a job.
Investors will also be looking at Thursday’s figures on initial jobless claims. Last week’s report showed that initial claims dropped to the lowest level since March 2020, when widespread lockdowns were enforced to slow the first wave of the pandemic.
With markets into the second half of 2021, investors are now wondering if the stunning first half run can continue.
Though U.S. stock markets are holding near record highs, some market analysts have pointed to signs of caution in some areas of the market.
Travel and leisure stocks along with value shares have been weighed down by worries over the rapid spread of the COVID-19 Delta variant, while yields on U.S. government bonds have remained subdued amid concerns over a potentially more hawkish Fed.
Some investors in recent weeks have also noted a concentration of the market’s gains in fewer stocks, which some view as a sign of declining confidence in the wider market.
Investors will now shift their focus towards the second-quarter earnings season and progress on President Joe Biden's infrastructure bill which could help the stock market keep up momentum.
The ECB is to publish the minutes of its June policy meeting on Thursday. ECB-watchers will also be on alert for news of several meetings due to take place in the coming weeks as part of the banks review of its monetary policy strategy.
The bank wants to revamp its inflation target - currently set out close to but not above 2% - and is aiming to get the review done by September.
On Wednesday, euro zone powerhouse German is to publish industrial production figures and the European Commission is to release updated economic forecasts for the European Union.
China is to release data on both consumer price inflation and producer price inflation on Friday. Market watchers will be paying close attention to the cost of raw materials, which have soared due to higher commodity prices, and whether these increases are being passed onto the consumer.
Prices are jumping in China and around the world, adding to fears that a wave of inflation could threaten the global economic recovery if it continues.
Reuters contributed to this report
By Noreen Burke, 6 July 2021. Investing.com