After a volatile first week of trading in 2019, there’s a lot to keep markets on edge in the week ahead.
Equities around the globe rallied on Friday while bond yields rose after sharply declining earlier in the week as U.S. employment data pointed to economic strength and Federal Reserve Chair Jerome Powell said the U.S. central bank would be patient with monetary policy.
News that China and the U.S. are to hold trade talks in Beijing next week also boosted investor sentiment.
Financial markets have been in turmoil over the past several months amid a combination of concerns over rising U.S. interest rates and the impact of the U.S. - China trade war on the global economy.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. Fed Minutes, Powell Speech
The minutes of the Fed’s December policy meeting will be published on Wednesday. At the meeting, the Federal Open Market Committee voted to increase interest rates for a fourth time in 2018 and indicated that two more rate hikes this year are likely.
While investors will be closely scrutinizing the minutes, they will probably be dated following remarks by Fed Chairman Jerome Powell last Friday.
He pledged that the central bank will be watching how the economy performs this year and will adjust policy accordingly.
“As always, there is no preset path for policy,” Powell said. “And particularly with muted inflation readings that we’ve seen coming in, we will be patient as we watch to see how the economy evolves.
Powell is due to deliver remarks at The Economic Club of Washington on Thursday.
2. Trade Talks
U.S. officials are scheduled to visit Beijing to resume trade talks on Jan. 7-8, as the two sides look to end a dispute that is inflicting increasing pain on both economies and roiling global financial markets.
President Donald Trump and Chinese president Xi Jinping agreed to a temporary trade ceasefire late last year on the sidelines of the G-20 summit in Buenos Aires, Argentina, with the U.S. president suspending his decision to impose higher tariffs on Chinese imports.
Trump has said talks toward a deal are progressing well, but it is unclear if Beijing will yield to key U.S. demands over trade imbalances, market access, and alleged Chinese abuses of intellectual property.
Data last week showed a marked loss of momentum in the world's two largest economies at the end of last year.
U.S. factory activity slowed more than expected in December, according to the Institute for Supply Management, while Chinese data on Monday showed its manufacturing activity contracted for the first time in 19 months.
3. U.S. Inflation Data
The Commerce Department will publish December inflation figures at 8:30AM ET Friday, which will be closely watched as investors try to determine the Fed’s outlook on monetary policy.
Consumer prices are expected to have declined 0.1% last month, the first drop in nine months and climbed 1.9% over the prior year, according to estimates.
Excluding the cost of food and fuel, core inflation is estimated to have increased 2.2% on a year-over-year basis.
This week’s calendar also features ISM non-manufacturing data on Monday, which is expected to show a modest decline, but the risk is that it turns in a downside surprise like the ISM manufacturing index.
The UK parliament returns from Christmas holidays on Monday and Prime Minister Theresa May might again push back a final vote on her Brexit deal, less than three months before the country is due to exit the European Union.
The vote has been rescheduled for the week starting Jan. 14 after a debate which is scheduled to begin in the coming week.
May was forced to postpone in December a key vote on the Brexit plan she has agreed with other EU leaders in the face of deep opposition from within her own Conservative Party and other groups in parliament.
May's inability so far to get her deal through parliament has alarmed business leaders and investors who fear that the country is heading for an economically damaging no-deal Brexit.
5. Bank of Canada Rate Decision
The Bank of Canada is widely expected to keep interest rates on hold and say it is sticking to its plan to raise them gradually when it meets this week. A decision is due at 10:00AM ET (15:00 GMT) on Wednesday.
The bank held steady at its Dec. 5 meeting and suggested the pace of future hikes could be more gradual, citing disappointing growth and low oil prices.
BoC Governor Stephen Poloz said in mid-December that the pace of interest rate hikes in Canada could be interrupted or sped up depending on the economic circumstances.