Top 5 Things to Watch in Markets in the Week Ahead

© Reuters.

By Daniel Shvartsman — 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 . Inflation is expected to at 8.3% year over year, while core inflation (ex energy and fuel prices) is expected to 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 , 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 , though, has added more urgency to the discussion, and analysts expect to make clear that rate hikes will be coming in Q3.

ECB president Christine Lagarde said as much in a blog post , so both the and the 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 rose 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 and finishing the week just shy of $120/barrel. Despite rumblings of slowdowns, (PMIs) and suggest that demand for oil will remain high, and there are doubts that OPEC’s production increase or even be fully realized.

For the week ahead, eyes are on whether U.S. President Joe Biden will decide to meet with Saudi Crown Prince Mohammed bin Salman amid human rights concerns. As we enter the summer travel season, weekly crude inventories and gasoline inventories will be of interest, and they will likely correspond with the Michigan , where readings are approaching 2008-09 lows (admittedly, lows also seen in the debt ceiling crisis of 2011, a reminder that the survey can reflect political sentiment as much as anything else).

4. Q1 Earnings season hits the homestretch

While we are through most of the Q1 earnings season, a few big names report numbers this week that will give read-throughs to various investing themes.

DocuSign Inc (NASDAQ:) is poised to report Thursday after the bell; the software as a service former highflyer was one of the first to start warning of slowing activity, and investors may now hope it will join the recent resurgence seen in names like Zoom Video Communications Inc (NASDAQ:) or Okta (NASDAQ:). Smartsheet (NYSE:) (Tuesday) and Coupa Software Inc (NASDAQ:) (Monday) are also among software companies reporting this week.

JM Smucker Company (NYSE:) and Campbell Soup (NYSE:) both report this week and may offer some insight into the impact of inflation in consumer staples. Likewise, Caseys General Stores (NASDAQ:), Five Below (NASDAQ:), and Signet Jewelers Ltd (NYSE:) all report from the retail sector, giving another round of inputs on consumer spending and appetite.

Nio (NYSE:) reports earnings on Thursday, with the Chinese electric vehicle automaker near 52-week lows as it has with coronavirus related lockdowns in China.

Check out our full earnings calendar here.

5. Any other corporate shoes to drop?

Last week was marked by a number of comments and corporate announcements from big names, including Jamie Dimon’s economic , Elon Musk’s email mooting a of Tesla’s workforce, and Coinbase (NASDAQ:) announcing a and rescindment of some accepted job offers. With several investor conferences this week, there will be plenty of opportunities for executives from across the economy to weigh in on whether the economy is teetering on the brink, as Dimon argued, or whether, as former Goldman Sachs (NYSE:) CEO Lloyd Blankfein argued, “we may yet land softly.”

The contrast between any further layoff news on the one hand and merger & acquisitions news, like Friday’s Bristol Myers (NYSE:) Squibb , on the other hand, will also provide grist for the investor mill.

It’s not the easiest market to navigate, but then again, when is it ever?

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