(Reuters) – The Bank of England will consider the impact of the government’s record energy plan as the country mourns the death of its queen.
European leaders are scrambling to keep their eyes peeled, and U.S. inflation data should be the last piece of the puzzle ahead of the Federal Reserve’s September meeting.
While China is trying to get its banks to help stimulate the economy, Volkswagen (ETR: VOWG_p) appears to be preparing to move luxury Automaker Porsche goes public.
Here are the market outlooks for the week ahead from Kevin Buckland in Tokyo, Emma-Victoria Farr in Frankfurt, Bill Schomberg, Vincent Fasseur and Karin Strohecker in London and Lewis Krauskopf in New York.
1/ Bank of England
The Bank of England meets on Thursday and must assess the impact on inflation of the government’s massive energy bill bailout for households. These measures will reduce price pressures in the short-term, but are likely to push them further as consumers’ finances won’t be hit the hardest.
Many economists believe the Bank of England will raise interest rates further by 50 basis points – usually large, but low On 75 Until a few days ago, investors had been betting on a bps rate hike.
Policymakers will have more data points to peruse before then, including Monday’s July economic output data, Tuesday’s latest job market data and Wednesday’s August inflation data.
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2/Gas running out
In the face of soaring energy prices that could spark social unrest, require rationing and cause a recession, European leaders are scrambling to withdraw from the common Radical plan in response to Russian President Vladimir Putin’s gas shutdown.
Governments are spending hundreds of billions of euros to help consumers and businesses deal with runaway bills. A plan by the new British government could cost as much as 150 a billion pounds, sending its currency to a near four-decade low.
Euro zone energy ministers gathered in Brussels on Friday to lay out plans and discuss options – including a gas price cap and emergency credit lines for energy market players, although there is no painless solution yet.
Meanwhile more oil-importing countries – such as India – are considering joining the G7 plan to cap the price of Russian oil, Washington said.
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3/PRICING POWER
Tuesday’s U.S. inflation data is one of the last — and perhaps most important — data to help the Fed decide what aggressive action to take. One it needs a rate hike in September.
July’s CPI report showed an unexpected slowdown in prices, which helped spur a rebound in stocks. The rally has since faded as Fed Chairman Jerome Powell warned that the central bank’s single-minded focus on controlling inflation could lead to economic pain.
On an annual basis, CPI growth was lower than expected at 8.5% in July, and the inflation measure was flat month-on-month. Preliminary estimates for August called for a monthly decline of 0.1%, but wildcards such as volatile energy prices kept investors nervous.
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4/ Press the strings? Markets were cheered by an unexpected downturn in Chinese inflation data on Friday, as it appeared to give policymakers plenty of room to ease and help boost a flagging economy. But lending data shortly after pointed to a dilemma: Who wants to borrow in a downturn? Loan growth was little changed, with a slight increase in August falling short of analysts’ hopes. Central banks have pumped cash into the system, but not boosting confidence as there is no clear path out of the deepening housing crisis or COVID-19 Lockdown. More help has been promised but has yet to materialise, causing the Hang Seng to hover near major lows and the yuan near two-year lows.
Industrial production, house prices and retail sales data released in September 16 will give more indication of the second largest country in the world economic situation.
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5/BOLD DEBUT
It was a bleak year for the capital market. But that probably won’t stop Volkswagen from listing luxury automaker Porsche.
Volkswagen fired the starting gun for its IPO despite European stocks teetering on record inflation and Russia’s energy gridlock. The next three weeks will be critical as bankers gather investor feedback and start building their books.
Overvalued – Investors expect a valuation between 60-85 Billion Euros ($50.4-$50.5 Billion) – Refs Special data shows that the IPO may be the largest in German history and the largest IPO in Europe since 1999.
Porsche will only step back at the IPO if “serious geopolitical issues arise,” the sports car brand’s chief financial officer said Tuesday. The Frankfurt Stock Exchange only saw two SPACs and one small major listed company at 2022.
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($1=0.9939 EUR)
