Investing.com Summary of Market Events

Inflation data this week will likely test investors’ mettle against the backdrop of Friday’s robust jobs report and uncertainty over Donald Trump’s policy plans. Earnings season is underway, and oil prices are at multi-month highs as energy traders prepare for supply disruptions. Here’s your look at what’s happening in markets for the week ahead.

Inflation Data

With a revival of inflation being one of the key risks facing equity markets, Wednesday’s CPI data will be closely watched.

Markets have already pushed out expectations for the next Federal Reserve rate cut to June after Friday’s unexpectedly strong jobs report indicated payrolls increased by 256,000 last month, far exceeding forecasts of 160,000, while the unemployment rate fell to 4.1%.

Economists anticipate the December CPI to show a 2.9% year-over-year increase.

While the Fed was confident inflation had moderated enough to begin cutting interest rates in September, the pace of annual inflation has remained above its 2% target. The Fed now projects inflation to rise 2.5% by 2025.

Minutes from the Fed’s latest meeting released Wednesday highlighted concerns that Trump’s policies on trade and immigration could prolong efforts to return inflation to target.

Big Banks Kick Off Earnings

JPMorgan, Wells Fargo, Citigroup, and Goldman Sachs will kick off fourth-quarter earnings on Wednesday, with Bank of America and Morgan Stanley reporting results on Thursday.

Robust investment banking fees, strong trading income, and reduced pressure to boost deposit rates are expected to contribute to a positive earnings season for U.S. banks. Expectations for bank results have also been buoyed by Trump’s election victory, which is anticipated to catalyze deregulation and business-friendly tax reforms, enhancing banks’ profitability.

S&P 500 company earnings are expected to have climbed nearly 10% in the quarter compared to a year earlier, according to LSEG IBES data cited by Reuters.

UK Inflation

Wednesday’s UK inflation data will draw attention following last week’s sell-off in UK government bonds, known as gilts, which increased pressure on the new Labour government as it seeks to invigorate the struggling economy.

British government bond yields have steadily climbed since September, reflecting lowered expectations for Bank of England rate cuts, additional borrowing in the new government’s budget, and higher U.S. Treasury yields with Trump expected to pursue a loose fiscal policy and increase tariffs.

The December CPI is projected to show an annual increase of 2.6%, remaining above the Bank of England’s 2% target.

Comments from BoE officials will be closely watched; Deputy Governor Sarah Breeden is expected to speak on Tuesday, followed by MPC member Alan Taylor’s remarks on Wednesday.

China Data

China is set to release a variety of data towards the week’s end, offering insights into the performance of the world’s second-largest economy as it braces for impending U.S. tariff hikes.

GDP data due on Friday is expected to confirm that the economy met its 5% annual growth target for 2024, as announced by President Xi Jinping late December.

Beijing will also provide data on house prices, industrial production, and retail sales.

China’s Vice Finance Minister Liao Min stated Friday that the government has sufficient fiscal policy tools to support economic growth this year and will increase spending to stimulate investment.

Oil Sanctions

Oil prices surged over 3% to their highest in three months on Friday as traders prepared for supply disruptions due to the broadest U.S. sanctions targeting Russian oil and gas revenue.

President Joe Biden’s administration has imposed fresh sanctions aimed at Russian oil producers, tankers, intermediaries, traders, and ports, intending to affect every stage of Moscow’s oil production and distribution chains.

Brent crude futures settled at $79.76 a barrel after exceeding $80 for the first time since October 7. US West Texas Intermediate crude settled at $76.57 per barrel.

The timing of the sanctions, just ahead of Trump’s inauguration on January 20, suggests he may maintain them as leverage for a Ukraine peace treaty, analysts indicate.