The five most important events to watch this week

It is expected to be an action-packed week in the markets with the first Federal Reserve (Fed) meeting, the results of technology companies, and the most recent employment report in the United States. Not to be left out, the Bank of England (BoE) will also hold its first meeting in 2024 to define its monetary policy, and China is expected to have better numbers in its Purchasing Managers Index (PMI). Here is everything you need to know to start the week

U.S. Federal Reserve Statement

All signs point to no change regarding interest rates this Wednesday. Meanwhile, investors are impatiently awaiting any hints from the committee members to get ahead of anything.

So much so that investors have moved up their estimates of the timing of the first-rate cut from March to May, following robust data and statements from policymakers that the cuts will most likely not be as aggressive as expected.

Although Friday’s data reported that inflation is moderating, consumer spending remains strong, which may cause price pressures to rise again.

Employment Report

Following the meeting and subsequent statement by the Federal Reserve, the U.S. will release its first month of the year employment report, which is expected to show that the economy created 177,000 new jobs, up from 216,000 last month.

The recent rally in stocks, which has driven the S&P 500 to record highs, has been promoted by soft estimates regarding the U.S. economy, where growth is expected to remain flat while inflation is declining.

A weaker-than-expected reading could mean that 525 basis points of interest rate hikes by the Federal Reserve since 2022 have begun to take effect, while a stronger-than-expected hire could reinforce the case for the central bank to continue with higher interest rates for a while longer.

“Magnificent Seven” results

Earnings releases will take all eyes this week, with the release of reports from five of the “Magnificent Seven” tech and massive growth stocks that have promoted markets in the past year.

Alphabet (GOOGL) and Microsoft (MSFT) will be the first to show results on Tuesday. Then come Apple (AAPL) and Amazon (AMZN) on Thursday, and finally, Meta (META) on Friday.

With the S&P 500 in a bull market, the results of the “Magnificent Seven” will be vital to the index’s ability to sustain its momentum.

Together, the market capitalizations of Alphabet, Apple, Amazon, Microsoft, and Meta represent about 25% of the S&P 500, which has a vital influence on how the index will perform in the market.

Bank of England

All indications are that the Bank of England will keep interest rates unchanged next Thursday, although there is a possibility that there will be no interest rate hike if inflation shows signs of picking up; it is expected that interest rates may remain tight for an extended period of time.

The most recent U.K. employment report shows that wage growth increased more slowly between September and November, although inflation rose to 4% in the final month of 2023.

The U.K. economy started 2024 on a positive note, although data last week showed signs that geopolitical tensions in the Red Sea are causing inflation to return in manufacturing.

The Bank of England increased interest rates 14 times between December 2021 and August 2023, reaching highs of 5%, just after inflation will reach its highest levels by the end of 2022, reaching 11%.

China PMI

This Wednesday, China will release Purchasing Managers’ Index (PMI) data, which estimates that even the Asian country’s economy continues to falter.

The Chinese economy increased by 5% during 2023. However, its recovery after the pandemic has not been as expected, suffering from a real estate recession, risks, deflation, and economic slowdown.

China’s central bank (PBC) announced a 50 basis point cut in bank reserves last week, the largest in two years. However, analysts believe that more measures are still needed for the economy to solidify and reach the expected levels.