Investing.com
Top 5 Things to Watch in Markets in the Week Ahead - CPI Report, ECB Meeting, Oil
Investing.com
5 min read

By Daniel Shvartsman

Investing.com -- Stock markets ended the first week of June on a down note, as a strong U.S. jobs report made clear the Federal Reserve and other central banks can continue their monetary tightening policy, at the expense of risk assets.

This week brings CPI reports in the U.S., as inflation remains the biggest concern at the Fed and other central banks. The European Central Bank meets this week amidst expectations of policy normalization. And with oil prices closing higher last week and a bevy of corporate rumblings over storm clouds ahead, reminders abound that a soft economic landing may be difficult to realize, no matter how strong the consumer is.

Here’s what to watch in the markets for the week ahead:

1. U.S. CPI Report

Friday’s U.S. CPI report for May comes a few days before the next Federal Reserve meeting, and will act as a final input before the Fed decides how much to hike rates. Inflation is expected to come in at 8.3% year over year, while core inflation (ex energy and fuel prices) is expected to come in at 5.9% year over year. The latter number would mark a third month of consecutive declines and make the case that core inflation may have peaked, which would echo the slower wage growth in last week’s jobs report. At the same time, the overall inflation number of 8.3% would be close to peak, and given the pain at gas pumps and grocery stores, consumers may take little solace in knowing the core number is leveling out.

2. European Central Bank meeting

While central banks around the world have begun their rate hike cycle, the ECB is seen as a step or two away from it. Eurozone inflation hitting record highs, though, has added more urgency to the discussion, and analysts expect this meeting to make clear that rate hikes will be coming in Q3.

ECB president Christine Lagarde said as much in a blog post two weeks ago, so both the ECB statement and the press conference to follow will provide a chance for Lagarde to elucidate the road back to positive interest rates and to re-affirm the bank’s credibility. The EUR/USDrose 1.67% since the end of April and 3.55% from mid-May lows, suggesting the bank has re-won at least a little bit of that credibility with markets.

3. Oil’s next direction

OPEC+’s announced 50% production increase did little to slow the rise of crude, with both WTI Futures and Brent finishing the week just shy of $120/barrel. Despite rumblings of slowdowns, economic expansion (PMIs) and consumer demand suggest that demand for oil will remain high, and there are doubts that OPEC’s production increase will be enough or even be fully realized.

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