22 May 2022 – The Week Ahead

Outlook:

In the week ahead, we provide you with the necessary information to build your strategy during the upcoming week with extra knowledge.

Market participants await a couple of important speeches, the German inflation data, in addition to the quarterly prelim GDP figures in the U.S. However, the COVID-19 measure remains to pressure on the Chinese and the global economies.

In the U.S.

Investors hope that Fed minutes can offer hints about whether the Fed can curb inflation without pitching the economy into recession.

Fed Chair Jerome Powell is confident the Fed can achieve a “soft landing”. However, market participants are not convinced the Fed can pull it off. Also, the minutes will show whether the economy is resilient enough for a tighter monetary policy.

Investors will prepare for earnings reports after disappointing results last week, adding to fears over the outlook for the economy. Although, Walmart and Target reported that while traffic was strong, high inflation has depleted the purchasing power of U.S. consumers.

U.K. and Eurozone

The U.K. and the Eurozone will release closely watched PMI data later this week.

While Eurozone PMI data was to the upside in April, with services boosted by the reopening following the Omicron wave. However, data for this month will cast light on how long consumers will keep spending on services as prices surge. Meanwhile, Germany’s Ifo business climate index for May, due out on Monday is expected to show a decline.

U.K. PMI data is expected to point to a reduction in demand in the service sector this month. Bank of England Governor Andrew Bailey is due to speak on Monday.

China

Concerns of an economic slowdown and China’s ongoing COVID-19 outbreaks could lead to high volatility. The People’s Bank of China held the one-year loan prime rate (LPR) at 3.7%, while cutting the five-year LPR to 4.45% from the previous month’s 4.6%.

Shanghai found three COVID-19 cases outside quarantine areas, which raises questions on whether authorities will go ahead with plans to ease a lockdown in the city.

However, China is looking to stock up its strategic crude stockpiles with Russian oil, a potential sign that it is strengthening its energy ties with Russia as the European Union works toward implementing sanctions on Russian imports in response to the war.