Week Ahead: GDP and Inflation

Week Ahead: GDP and Inflation

Last week saw a sharp selloff in US equities as market concerns about overvaluation weighed heavily. The NASDAQ, Dow Jones, and S&P 500 all posted declines of 4.52%, 3.66%, and 3.28%, respectively, highlighting investor fears of an overstretched market. As election season approaches in the US, traders will also be on edge for any policy shifts that could further shake the markets.

In addition to these concerns, rising tensions between Hong Kong and China could influence global markets, prompting policy changes in countries like Australia and the US. These developments make for a potentially turbulent start to the week, but let’s dive into the key economic indicators to watch.

Tuesday, September 8th – Japan GDP Growth Annualized

Japan is facing multiple challenges: a rise in coronavirus cases, Prime Minister Shinzo Abe’s resignation, and Typhoon Haishen making landfall, further complicating an already difficult year. Analysts predict a drastic 28.6% drop in GDP growth, a particularly tough blow for a country already struggling with sluggish economic performance in recent years.

Tuesday, September 8th & Thursday, September 10th – Euro Area GDP Growth QoQ & ECB Interest Rate Decision

The European Union has largely acted in unison in response to the pandemic, but individual countries are beginning to release targeted stimulus plans. France’s 100 billion Euro stimulus package, nearly 4% of its GDP, stands out. Analysts forecast a 12.1% drop in Eurozone GDP growth for the quarter. Meanwhile, the European Central Bank (ECB) is expected to maintain rates at 0%, reflecting the ongoing economic challenges in the region.

Thursday, September 10th – Bank of Canada Interest Rate Decision

Canada has managed to avoid a full-scale lockdown, and as a result, its economic recovery is progressing relatively well. With the focus on returning students to school in Quebec, economists predict the Bank of Canada will keep interest rates steady at 0.25%. The central bank has signaled that it will maintain these low rates until economic slack is absorbed and the 2% inflation target is met.

Friday, September 11th – UK GDP YoY

The UK continues to struggle with the pandemic, and Prime Minister Boris Johnson has insisted that Brexit talks should continue despite the challenges. With over 347,000 confirmed coronavirus cases and a recent spike in daily cases, the UK economy is expected to show a significant contraction. Watch for updates on this key indicator.

Saturday, September 12th – United States Inflation Rate YoY

The US is entering a volatile period, with market volatility increasing ahead of the election. The Federal Reserve has pledged to use new tools to combat inflation, but it may be too early to see their effects. Analysts are expecting the inflation rate to come in at 1.2%, but a higher-than-expected figure could boost gold prices and weaken the dollar, adding another layer of uncertainty to the markets.

The coming week promises to be a pivotal one, with major economic reports that could shape market sentiment in the wake of the ongoing pandemic and political uncertainty. Keep an eye on these key data points for clues about how the global economy is recovering and what might lie ahead.