(Reuters) -Key jobs figures in the United States, Chinese business activity data and European inflation readings are giving more evidence on the pull and push factors impacting the world’s top economies.
A deal on the U.S. debt ceiling, struck on Sunday, will move to Congress for a vote while in Turkey, voters gave President Tayyip Erdogan a mandate for another five years. Meanwhile, tech investors are on the hunt for undervalued opportunities in an over-valued space.
Here’s a look at the week ahead in markets from Kevin Buckland in Tokyo, Lewis Krauskopf in New York, Dhara Ranasinghe, Naomi Rovnick and Karin Strohecker in London.
1/JOBS IN FOCUS
Will U.S. jobs data out on June 2 show that the world’s top economy is strong enough to avoid a recession but not so hot that it forces another hawkish move by the Federal Reserve?
Non-farm payrolls for May are expected to record job growth of 180,000, according a Reuters poll. In April, U.S. job growth accelerated to add 253,000 with wage gains increasing solidly.
The jobs report will be one of the last pieces of data before the June Fed meeting, where the central bank is expected to hit pause on its aggressive 14-month-old rate hiking cycle to tamp down inflation.
Meanwhile, U.S. President Joe Biden on Sunday finalised a budget agreement with House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until Jan. 1, 2025, and said the deal was ready to move to Congress for a vote.
2/ECB 1, MARKETS 0
At its meeting three weeks ago, the ECB reiterated that it was very much in rate-hiking mode to tame inflation. Markets, not convinced, dialled back bets for further increases and focused on weakening growth. Germany just entered recession.
Yet, it is traders that – for now – have had to rethink their view. Thursday’s flash May euro zone inflation number and a slew of national data in the days ahead will likely stoke the peak rate debate. Euro zone business activity remains resilient, core inflation is sticky above 5% and wage pressures are picking up.
HSBC expects the ECB’s key rate to peak at 4% from a current 3.25%. Data on Wednesday meanwhile showed UK inflation eased by less than in April, sending gilt yields rocketing. Traders know that they, like central bankers and economists, don’t always get it right.
3/CHINA’S LOTTERY HOPES
It’s China’s turn for PMI report cards – and there’s little reason to expect any turnaround in the ailing economy. From inflation figures to retail sales, recent data has without fail painted a dreary picture of lackluster domestic demand.
It seems the only thing the Chinese consumer wants is lottery tickets, with sales soaring to a decade high, staking their fortunes on luck rather than policy makers.
There is optimism in the interbank repo market, though, where record activity is a sure sign that traders expect central bank stimulus soon.
Of course, burst hopes of a post-COVID boom aren’t the only reason for caution: the tit-for-tat tech export spat with the U.S. continues to ramp up, while the Asian giant keeps sidling closer to Russia, provoking much discomfort in the West.
4/FIVE MORE YEARS
President Tayyip Erdogan extended his two decades in power in elections on Sunday, winning a mandate to pursue increasingly authoritarian policies that have polarised Turkey and strengthened its position as a regional military power.
Erdogan prevailed despite years of economic turmoil which critics blame on unorthodox economic policies.
While analysts expected that Erdogan would have to adjust some of his heterodox policies to ensure the country’s economy, marked by boom and bust cycles, would find some smoother waters ahead, they were cautious over just how much change a new government would herald.
Turkey’s lira wobbled near record lows against the dollar on Monday, just shy of the 20.06 low hit on Friday.
5/AI MANIA
Artificial Intelligence is having a moment. Shares in AI chipmaker Nvidia soared some 25% in a single day after issuing bullish revenue forecasts.
The technology took centre stage when Microsoft-backed Open AI unleashed its essay-writing bot ChatGPT last November. Industry insiders forecast huge progress in the competence of this so-called generative AI, while regulators and politicians fret about AI stealing jobs, or spreading misinformation.
For investors, it raises a whole other sort of questions: Will AI cause long-term deflation? Will it create new jobs and new industries? And how will it make money?
Stocks linked to AI are surging but all the tech’s ramifications are far from certain yet. Remember the dotcom bubble?
(Compiled by Karin Strohecker; Editing by Toby Chopra)
