Investing.com – This week's inflation data is likely to test investors' mettle on the back of Friday's strong jobs report and uncertainty over Donald Trump's policy plans. Earnings season is underway, and oil prices are at their highest levels in several months, as energy traders brace for supply disruptions. Here's your look at what's happening in the markets for next week.
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Inflation data
As inflation rebounds, one of the main risks facing stock markets will be to closely monitor Wednesday's CPI data.
Markets have already pushed expectations for the next Fed rate cut into June after an unexpectedly strong jobs report on Friday showed jobs increased over the past month, well above expectations of 160,000 and falling to 4.1%.
Economists expect the December CPI to show a year-over-year increase.
While the Fed was confident that inflation had moderated enough to begin cutting interest rates in September, the pace of annual inflation remained above the Fed's 2% target. The Fed now expects inflation to rise by 2.5% in 2025.
Minutes from the Federal Reserve's latest meeting, released on Wednesday, showed that policymakers are concerned that Trump's policies on trade and immigration could prolong efforts to bring inflation back on target.
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Big banks start making profits
JP Morgan (NYSE:), Wells Fargo (New York Stock Exchange symbol:), Citigroup (NYSE:) and Goldman Sachs (NYSE:) will begin fourth-quarter earnings on Wednesday, while Bank of America (NYSE:) and Bank of America (NYSE:) will begin fourth-quarter earnings on Wednesday. Morgan Stanley (NYSE:) reports results on Thursday.
Strong investment banking fees, solid trading income and easing pressure to boost deposit rates are expected to lead to an upbeat earnings season for US banks.
Expectations for bank results also strengthened after Trump's election victory. The president-elect is expected to initiate a wave of business-friendly deregulation and tax reforms, which could significantly boost banks' profitability.
The company's profits are expected to rise nearly 10% in the quarter from a year earlier, according to LSEG IBES data cited by Reuters.
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Inflation in the United Kingdom
UK inflation data on Wednesday will be in focus after last week's sell-off in British government bonds, known as government bonds, which piled pressure on the new Labor government as it seeks to stimulate the moribund economy.
British government bond yields have been rising steadily since September, reflecting lower expectations for interest rate cuts from the Bank of England, additional borrowing in the new government's October 30 budget and rising US Treasury yields on expectations that Trump will pursue a looser fiscal policy and increase tariffs.
The CPI for December is expected to show an annual increase of 0.000, remaining above the Bank of England's target of 2%.
BoE officials' comments will also be in the spotlight, with Deputy Governor Sarah expected to speak on Tuesday, and Monetary Policy Committee member Alan Taylor due to deliver his remarks the following day.
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China data
China will release a slew of data at the end of the week that will give investors a chance to see how the world's second-largest economy will fare as it faces the blow of an impending US tariff hike.
Data due on Friday are expected to confirm that the economy has achieved its 5% annual growth target for 2024, as previously announced by President Xi Jinping at the end of December.
Beijing will also publish data on and.
Chinese Vice Finance Minister Liao Min said on Friday that Beijing has ample fiscal policy space and tools to support economic growth this year, and that it will boost spending to stimulate investment.
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Oil sanctions
Oil prices rose more than 3% to their highest levels in three months on Friday, as traders braced for supply disruptions due to the largest US sanctions package targeting Russian oil and gas revenues.
President Joe Biden's administration imposed new sanctions targeting Russian oil producers, tankers, brokers, traders, and ports, with the aim of striking every stage of Moscow's oil production and distribution chains.
Futures settled at $79.76 per barrel after exceeding $80 per barrel for the first time since October 7. It settled at $76.57 per barrel.
Analysts said the timing of the sanctions, ahead of Trump's inauguration on January 20, makes it likely that he will keep the sanctions in place and use them as a negotiating tool to conclude a peace treaty with Ukraine.
