Top 5 things to watch in the markets in the week ahead By

By Noreen Burke — The impasse over the U.S. debt ceiling looks likely to loom large in financial markets as earnings season continues. Markets will receive an update on fourth-quarter US growth that is expected to remain solid despite more recent signs of a slowdown. The Eurozone is due to release PMI data while inflation data from Japan will also be watched. Here’s what you need to know to start your week.

  1. Setting the debt ceiling

The U.S. government reached its $31.4 trillion borrowing limit on Thursday amid a dispute between hardline Republicans and President Joe Biden’s Democrats over raising the debt ceiling. country’s debt.

House Republicans want to cut government spending before approving a higher cap; a similar request in 2011 prompted S&P to cut the US credit rating for the first time and caused chaos in financial markets.

The high-stakes impasse is widely expected to last months and could come at the last minute as each side tests the other before June – the date beyond which the Treasury is likely to have exhausted emergency maneuvers to throw out the default.

“From an economic and financial perspective, a failure to raise the debt ceiling would be an unmitigated disaster,” said David Kelly, Chief Global Strategist for JPMorgan Chase & Co. funds.

  1. Technology gains

Earnings results in the coming week will test the recent rebound in tech stocks amid questions about whether megacap companies can boost revenue and profits while cutting costs as the U.S. economy shows signs of slowing down and possible. recession.

Microsoft (NASDAQ: ), the second largest company in the United States by market value, reports on Tuesday followed by Elon Musk’s Tesla (NASDAQ: ) on Wednesday, and Intel (NASDAQ: ) on Thursday.

The earnings season got off to a tepid start. Companies are expected to post an overall decline of 2.9% in fourth-quarter earnings versus the year-ago period, according to Refinitiv data. compared with a decrease of 1.6% in the beginning of the year.

Alphabet (NASDAQ: ) said Friday it is cutting about 12,000 jobs, or 6% of its workforce, the latest tech giant to announce layoffs. Microsoft on Wednesday said it would eliminate 10,000 jobs while Amazon (NASDAQ: ) began notifying employees of its own 18,000 job cuts.

  1. United States economic data

The United States will publish a first estimate of the fourth quarter of the gross domestic product on Thursday with analysts expecting that the economy has grown by an annualized, after 3.2% in the third quarter.

While this looks strong, the most recent economic data indicated that the economy will lose momentum by the end of 2022 – retail sales have fallen by 1% or more in the past two months, industrial production is decreased for the last three and residential construction posted six straight. decrease monthly.

GDP is expected to weaken in the coming quarters as the aggressive Federal Reserve continues to hit demand.

The economic calendar also includes data on , and Thursday and Friday.

  1. Eurozone

Several European Central Bank officials are due to make appearances before policymakers enter their traditional pre-policy meeting period on Thursday. The ECB’s next policy meeting is on February 2.

The president of the ECB, who last week pushed back against market bets that he will slow the pace of rate increases given the latest falls in inflation, is scheduled to make two appearances.

Meanwhile, data from the Eurozone can give more indication of the health of the economy.

The block is to release flash PMI data on Tuesday which is expected to tick higher, while the closely watched German on Wednesday is expected to improve for a second month.

  1. Watch the inflation

Japan will release consumer price inflation data for the region on Friday that will be closely watched after the Bank of Japan last week defied market expectations for more policy change. small when he maintained the control rate of the yield curve.

Japanese inflation is at a four-decade high and is double the BOJ’s 2% target, but the BOJ is pushing back against market bets that the end of its ultra-long monetary policy -loosa is close.

Meanwhile, they are due to release inflation data on Wednesday, as the Reserve Bank of Australia considers whether it is time to pause rate hikes and the Reserve Bank of New Zealand is considering how much more to tighten monetary policy.

–Reuters contributed to this report

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