- Investors expect the Fed to increase interest rates by 25 basis points.
- This week will also see the release of highly anticipated US employment figures.
- China’s economic activity resumed expanding in January.
Equities inched lower on Tuesday as investors readied themselves for a busy week featuring central bank meetings, a flurry of corporate announcements, and important US economic data.
Investors expect the Fed to increase interest rates by 25 basis points (bps) on Wednesday. The Bank of England (BOE) and the European Central Bank (ECB) will likely announce interest rate increases of 50 basis points on Thursday.
This week will also see the release of highly anticipated US employment figures. More than 100 S&P 500 businesses, including Alphabet, the parent company of Google, Apple, and Amazon.com, are set to report results.
According to ANZ analysts, this week will be significant for central banks and US equities since several well-known companies are scheduled to release earnings that will give a micro-overview of the macroeconomy.
After a wave of COVID-19 infections spread through the country more quickly than anticipated due to the removal of pandemic restrictions, China’s economic activity resumed expanding in January. The official purchasing managers’ index, which gauges manufacturing activity, increased from 47.0 in December to 50.1.
However, investors remained wary as they searched for further indications of the pandemic-hit economy’s recovery.
The first comprehensive data to demonstrate how rapidly China is recovering from its COVID reopening wave showed domestic orders and consumption driving output higher. However, analysts cautioned that the economy faced prolonged weakness in external demand.
The demand for China’s exports, which was 9.9% lower last month compared to a year earlier, has decreased as foreign economies have weakened due to rising interest rates.
The major US indexes fell on Monday as decreases in the shares of large technology and other firms weighed on American equities.
Investors will be closely watching Chair Jerome Powell’s news conference after the Fed’s two-day policy meeting on Wednesday for hints on whether the rate-hiking cycle may end and for indications of how long rates may remain high.
The market will also have to deal with a deluge of US economic data, including the January payrolls report due on Friday. Investors believe that a weaker labor market will be crucial in bringing down the high inflation rate.