Yazar: Noreen Burke
Investing.com – In an environment of concerns about what such a large stimulus package can do to inflation and interest rates, investors will be watching Congress progress on President Joe Biden’s $ 1.9 trillion stimulus package. With the consumer price index (CPI) and producer price index (PPI) reports to be shared on Wednesday and Thursday, market participants will focus on the US inflation figures. The European Central Bank (ECB) will hold a policy meeting on Thursday. On the other hand, the UK will share January growth figures, which will reflect the return to a general quarantine, as well as the results of Brexit.
Here’s what you need to know to start this week:
1. Incentive: a double-edged knife?
The Senate will go to the Palace on Tuesday to be voted after President Biden’s $ 1.9 trillion stimulus package is passed on Saturday. Once accepted at the Palace, it will be sent to Biden and is hoped to sign before March 14, when the benefits of increased unemployment application expire.
The pandemic stimulus package would be a strong boost for the economic recovery and the stock market, but optimism waned on fears about rising inflation and interest rates.
Investors took the recent increase in bond yields to levels they had not seen since before the epidemic, as a sign that it is likely to hurt inflation expectations.
On Friday, US Treasury Secretary Janet Yellen stated that higher long-term Treasury returns are a sign of a stronger recovery, not worries about an increase in inflation.
2.US inflation figures
Investors will be watching closely the US inflation figures, which will be released on the day, amid concerns over possible indicators of increasing price pressures.
Fed Chairman Jerome Powell said last week that “I think we will be patient,” even if prices rise as expected this spring, and that monetary policies will not change until the economy is “well ahead of its recovery”.
This week, Fed officials will be in a traditional period of silence before the central bank’s March 16-17 meeting. Other reports to watch this week include Thursday’s and.
3. Bottom to buy?
With the US tech stocks falling, investors are debating whether this drop is an opportunity to take a bottom or a more painful sign for stocks that have driven the rise in the market for years.
Taking advantage of the decline of names like Apple (NASDAQ 🙂 and Amazon (NASDAQ 🙂 is the winning strategy of the last decade.
However, some market participants are concerned that the current decline may take longer than previous lows. The prospects for a strong recovery in the US economy trigger a shift from the “stay-at-home” trade to stocks that will benefit from the reopening of the economy. Increasing bond yields are accelerating this rotation.
Last week, it fell for the third consecutive week, but reversed on Friday, finishing 1.6% higher. This is a sign that after a tumultuous week some bargain hunters may have already raided.
4th ECB meeting
Following the extended quarantines in the first quarter, the main event for the euro zone will be Thursday. Politicians will assess the damage to economic growth, especially on the backdrop of vaccine distribution struggling to gain momentum compared to similar initiatives in the UK and the US.
ECB chief Christine Lagarde will share the bank’s new quarterly forecast at the press conference after the policy meeting.
Apart from the ECB meeting, the euro zone will share January figures, which are expected to shrink.
5. UK GDP figures
The UK will share January on Friday and will not come as a surprise, as the country is expected to return to complete quarantine and signal a major shrinkage early in the year as the Brexit effects hit trade.
GDP growth will suffer from closures in the consumer service sectors.
However, while the change in EU trade conditions will come into effect, manufacturing will suffer as well. The jury is still unclear as to how big the economic impact of the change in terms of trade could be.
– This news has the contribution of Reuters.