Investing.com -- Wednesday’s minutes of the Federal Reserve’s July meeting will be closely watched as investors look for guidance on the near-term path of interest rates. Retail sales data and retail earnings will give insights into the health of consumer spending while data out of China is expected to underline concerns over the faltering recovery in the world’s number two economy. Here’s what you need to know to start your week.
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Fed minutes
Before markets start turning their attention to the Fed’s annual get together in Jackson Hole, Wyoming at the end of the month, investors will be focusing on Wednesday’s minutes from the central bank’s July policy meeting.
The Fed raised rates by 25 basis points last month and left the door open to another hike in September. The minutes will help investors gauge the appetite for further rate increases, although markets are betting on a pause in September.
Data last week showed that while U.S. consumer and producer prices increased moderately in July the overall trend indicated that inflationary pressures are easing.
The U.S. central bank has increased interest rates by 5.25 percentage points since March 2022 to bring inflation back down to its 2% goal.
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U.S. economic data
The U.S. is to release July retail sales data on Tuesday which is expected to show a pickup in demand at the start of the third quarter after a smaller-than-expected increase in June.
Other data is expected to indicate that the manufacturing sector is still struggling - the Empire State manufacturing index is expected to fall into negative territory, while the Philly Fed manufacturing index is expected to remain in negative territory.
Data on the housing sector is expected to be more positive with reports on building permits and housing starts on Wednesday expected to show signs of stabilization.
The U.S. is also to release the weekly report on initial jobless claims on Thursday which is expected to tick lower after a larger than expected increase last week.
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Retail earnings
Second-quarter earnings season is winding down with S&P 500 results presenting a mixed picture - companies are beating analysts' profit expectations at the highest rate in nearly two years even as revenue beats dropped to the lowest since early 2020.
The largest U.S. retailers are set to report their results this week, which will give investors an important insight into the health of consumer spending, a major driver of the U.S. economy.
Home Depot (NYSE:HD) is due to report ahead of the open on Tuesday, Target (NYSE:TGT) will deliver results on before Wednesday’s market open, followed a day later by Walmart (NYSE:WMT). Other major retailers such as Macy’s (NYSE:M) Nordstrom (NYSE:JWN), Kohl’s (NYSE:KSS) and Lowe’s (NYSE:LOW) will report in the coming weeks.
Investors will be focusing on what retailers have to say about how inflation is affecting margins as higher prices erode households’ spending power.
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Chinese data
China’s post-COVID economic recovery has faltered in recent months after a strong first quarter, weighed down by weak demand at home and abroad.
Beijing is to release data on retail sales, industrial production and fixed asset investment on Tuesday, which are expected to point to only modest gains.
Data last week showed that China's consumer prices posted their first annual decline in more than two years in July, adding to pressure on policymakers to do more to shore up the economy.
Authorities have pledged to roll out measures to support the economy, though details have been scant, disappointing investors.
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Oil price gains
Oil prices rose on Friday after the International Energy Agency forecast record global demand and tightening supplies, pushing prices higher for the seventh consecutive week, the longest streak of gains since 2022.
Demand touched an all-time high of 103 million barrels per day in June and could rise to a fresh peak this month, the IEA predicted.
Meanwhile, output cuts from Saudi Arabia and Russia set the stage for a sharp decline in inventories over the rest of 2023, which IEA said could drive oil prices even higher.
Supply cuts and an improving economic outlook have created more optimism among oil investors, OANDA analyst Craig Erlam told Reuters. However, he noted signs momentum was wearing thin after a sustained rally.
--Reuters contributed to this report