Investing.com – The U.S.-China trade spat will likely remain a key driver of sentiment in the week ahead after reports said U.S. President Donald Trump wants to move forward with tariffs on $200 billion in Chinese goods.
U.S.-Sino trade-war fears have been simmering for months. Neither side is showing any signs of backing down, fueling worries that world’s two largest economies are spiraling towards a trade war that could shake the global economy.
Besides trade rhetoric, the U.S. will see a relatively quiet week in terms of economic releases, with a report on the housing sector expected to draw the most attention.
Meantime, in Europe, traders will be able to get their teeth into the latest snapshots of UK inflation and retail sales for further indications on the continued effect that the Brexit decision is having on the economy.
This week’s calendar also features flash survey data on euro zone business activity for September, which should give some indication of how the region’s economy is coping with global trade conflicts, Italian politics and messy Brexit negotiations.
Elsewhere, in Asia, a monetary policy announcement from the Bank of Japan will be on the agenda, though no change is expected.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. U.S.-China Trade Developments
Market focus will largely be attuned to the next potential steps in the tit-for-tat trade dispute between the U.S. and China.
U.S. President Donald Trump is likely to announce new tariffs on about $200 billion on Chinese imports as early as Monday, a senior administration official told Reuters on Saturday, despite Treasury Secretary Steven Mnuchin’s attempts to restart trade talks with China.
The tariff level will probably be about 10%, the Wall Street Journal reported, quoting people familiar with the matter. This is below the 25% the administration said it was considering for this possible round of tariffs.
The decision comes despite a Treasury invitation last week to senior Chinese officials, including Vice Premier Liu He, for more talks to try to resolve trade differences between the world’s two largest economies.
Trump has demanded that China cut its $375 billion trade surplus with the United States, end policies aimed at acquiring U.S. technologies and intellectual property and roll back high-tech industrial subsidies.
Investors fear an escalating trade war between the world’s two biggest economies could hit global growth and damage sentiment.
2. U.S. Housing Data
The data is expected to show that permits dipped 0.1% slightly to 1.310 million last month, while housing starts are forecast to show a gain of 5.8% to 1.240 million.
Besides the housing data, this week’s rather light economic calendar also features surveys on manufacturing conditions in the Philadelphia and New York regions.
Fed speakers are also quiet ahead of their Sept. 25-26 meeting, where they are expected to raise interest rates.
On Wall Street, there is a late-quarter lull in earnings news, with just a handful of reports due in the week ahead, including FedEx (NYSE:FDX) and Oracle (NYSE:ORCL) Monday, General Mills (NYSE:GIS) on Tuesday and Micron (NASDAQ:MU) Thursday.
3. UK Inflation Figures
The UK Office for National Statistics will release data on consumer price inflation for August at 0830GMT (4:30AM ET) on Wednesday.
Analysts expect annual CPI to inch down to 2.4%, a tad slower than the 2.5% increase seen in July, while core inflation is forecast to dip from 1.9% to 1.8%.
In addition to the inflation report, traders will focus on monthly retail sales data due on Thursday for further hints on the health of the economy.
The Bank of England (BoE) kept interest rates on hold last week and highlighted greater financial market concerns about Brexit.
Brexit talks are set to intensify over the coming week, with the first of three summits that European Union leaders hope will settle an agreement for departing Britain within the next two months.
EU officials will get an update on negotiations in Austria on Thursday and also decide whether to hold a special summit on Brexit in November, now that they no longer expect to clinch a deal at their regular gathering scheduled for Oct. 18-19.
The timing of the meetings tallies with EU Brexit negotiator Michel Barnier’s suggestion that an exit deal could be struck in six to eight weeks if negotiators are realistic in their demands.
Most economists do not expect the BoE to raise rates again until after Britain has left the EU.
4. Flash Euro Zone PMIs
IHS Markit’s composite flash Purchasing Managers’ Index (PMI) for the euro zone is due at 0800GMT (4:00AM ET) on Friday, amid expectations for a slight decline to 54.4.
The index measures the combined output of both the manufacturing and service sectors and is seen as a good guide to overall economic health.
Ahead of the euro zone PMI’s, France and Germany will release their own PMI reports at 0700GMT and 0730GMT respectively.
The European Central Bank also kept its policy unchanged as expected last week, staying on track to end bond purchases this year and raise interest rates next autumn.
5. Bank of Japan Policy Meeting
The Bank of Japan (BOJ) is widely expected to keep its short-term interest rate target at minus 0.1% and the 10-year government bond yield target at around zero percent at the conclusion of its two-day meeting on Wednesday.
The central bank is expected to debate whether escalating global trade tensions could undermine its confidence that the export-reliant economy will sustain a moderate expansion.
Japan and the U.S. will likely hold a second round of trade talks on Friday between Economy Minister Toshimitsu Motegi and U.S. Trade Representative Robert Lighthizer.
Tokyo wants to avert steep tariffs on its car exports and fend off U.S. demands for a bilateral free trade agreement.