The U.S. inflation data and two days of congressional testimony by Federal Reserve (Fed) Chair Jerome Powell will likely be the top highlights for investors and markets next week, in addition to focusing on the earnings of top banks and companies such as PepsiCo.
Powell is likely to tell lawmakers that Federal Reserve officials need further confirmation that inflation is slowing before they can cut interest rates, even with evidence building of softer growth and employment, Bloomberg reported on Saturday.
U.S. job gains eased slightly in June while unemployment edged up, government data showed Friday, in the latest sign that the world's biggest economy is cooling as policymakers hope.
The country added 206,000 jobs last month, said the Labor Department, marking a slower pace of hiring than May's revised 218,000 figure.
But the gains still beat a Briefing.com consensus estimate of 185,000, signaling that the labor market is still relatively resilient.
The jobless rate ticked up from 4.0% to 4.1%.
The report comes on the back of slowing activity in the manufacturing and services sectors, alongside easing inflation.
While there is still some way to go, these indicators could give the U.S. central bank more confidence in shifting toward interest rate cuts after holding rates at a high level in recent months.
However, Powell signaled earlier during the week they needed to be more confident that "inflation is moving down to 2% before we start our loosening policy."
Powell said on Tuesday that the American economy saw solid growth in the first half, while the labor market remains strong and inflation, after pausing in the first quarter, now shows signs of resuming a disinflationary trend.
"We made quite a bit of progress in bringing back inflation down to our target; while the labor market has remained strong, growth has continued. We want that process to continue," he said at the European Central Bank (ECB) Forum on Central Banking 2024 held in Sintra, Portugal.
June consumer price index (CPI) data are projected to be another step toward that goal, but the figures are only set for release on Thursday – after the Fed chair wraps up two days of congressional testimony. Powell speaks Tuesday to the Senate Banking Committee, followed by a House panel appearance on Wednesday.
Europe, Asian markets
Investors will focus on Monday on the aftermath of the French election. While financial-market concerns have eased, the prospect of a hung parliament leading to a minority government that lacks the resolve to repair the public finances remains a likely outcome.
In the U.K., whose own election led to a landslide victory for Keir Starmer’s Labour Party, investors will be on the lookout for any initial decisions impacting the economy and its own strained fiscal position.
With the new cabinet announced by Starmer, the U.K. got its first female chancellor of the exchequer, Rachel Reeves. In her first assessment for the BBC after the election, she pointed out the challenging condition of Britain's finances.
"There’s not a huge amount of money there," she told the BBC. "I know the scale of the challenge I inherit."
"Private-sector investment is the lifeblood of a successful economy. We need to unlock private-sector investment," she said.
Elsewhere, in major Asian markets, China may get some mildly positive news on prices, with data Wednesday expected to show consumer inflation ticked higher in June and factory-gate deflation eased to the slowest pace since January 2023.
In other data, Japanese figures for workers’ pay are due to be announced on Monday, while Singapore is set to release second-quarter gross domestic product (GDP) data during the week, according to Bloomberg.