Five Things to Watch Out For in the Markets in the Next Week By

© Reuters

By Noreen Burke – Investors will closely monitor the progress of President Joe Biden’s $ 1.9 trillion pandemic relief plan through Congress this week amid concerns about what such a large stimulus package could do. to inflation and interest rates. Market participants will focus on the US inflation figures with a report on the consumer price index due out on Wednesday and the producer price index scheduled for Friday. In Europe, the European Central Bank will hold its last policy meeting on Thursday. Meanwhile, the UK will release growth figures for January which will reflect a return to a full national lockdown at the beginning of the year, as well as the fallout from Brexit. Here’s what you need to know to start your week.

  1. Encouragement: a double-edged sword?

After the Senate approved President Joe Biden’s $ 1.9 trillion stimulus package on Saturday, it will go to a House vote on Tuesday. After approval by the House, it will be sent to Biden, who hopes to sign the bill before the enhanced unemployment benefits expire on March 14.

The pandemic aid package will give a powerful boost to the economic recovery and the stock market, but the optimism has been offset by fears about rising inflation and interest rates.

Investors have taken the recent surge in bond yields, which has pushed the benchmark index to levels not seen since before the pandemic, as a sign of potentially damaging inflation expectations.

But US Treasury Secretary Janet Yellen said on Friday that higher yields on long-term Treasuries were a sign of expectations for a stronger recovery, not more concern about inflation.

  1. US inflation figures

Investors will be watching US inflation figures closely and amid concerns about the possible implications of mounting price pressures.

Last week, Fed Chairman Jerome Powell said that even if prices go up as anticipated this spring, “I hope we will be patient” and not change monetary policies that should remain supportive until the economy is ” well advanced on the road to recovery. ” .

This week, Fed officials will be in the traditional blackout period before the next central bank meeting on March 16-17. Other reports to watch this week include Thursday’s numbers and an update.

  1. Buy the dip?

With US tech stocks falling, investors debate whether the drop is an opportunity to buy the drop or a sign of more pain for stocks that have been driving market gains for years.

Capitalizing on pullbacks in names like Apple (NASDAQ 🙂 and Amazon (NASDAQ 🙂 has been a winning strategy for the past decade.

Some market participants, however, are concerned that the current downturn may be longer lasting than previous ones, as expectations of a strong economic recovery in the US drive a shift from “stay-at-home” trading to actions that will benefit from the reopening of the economy. . Rising bond yields are accelerating that turnover.

Last week, it posted its third consecutive weekly decline, but reversed losses on Friday to end 1.6% in a sign that some bargain hunters have already rushed in after a bumpy week.

  1. ECB meeting

Thursday is the main event for the euro zone after prolonged closings in the first quarter. Policymakers will assess the damage to economic growth in a context of vaccine implementation that is struggling to gain traction, particularly compared to similar efforts in the UK and US.

ECB Director Christine Lagarde will also announce the bank’s new quarterly forecasts at the press conference after the policy meeting.

In addition to the ECB meeting, the euro zone will release January figures on Friday, which are expected to contract.

  1. UK GDP

The UK will launch in January on Friday, and it will come as no surprise that they are expected to target a sharp contraction early in the year as the country returned to a full national lockdown and the effects of Brexit weighed on trade.

GDP growth will be affected by the closure of several consumer services sectors.

But there will also be an impact from manufacturing as the change in EU trade terms kicks in. The jury is still out on how big the economic impact of the change in trade terms could be.

–Reuters contributed to this report.

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