Investors will be watching joint testimony to Congress by Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen on Tuesday and Wednesday amid concerns over how much further the recent surge in Treasury yields can run. A summit organized by the Bank of International Settlements gets underway on Monday and will feature speeches from global central bank leaders, including Powell. The U.S. economic calendar includes data on housing and personal income and spending. Meanwhile, the euro zone will release PMI data for March while the UK is to publish a slew of reports including jobs, inflation, PMIs and retail sales. Here’s what you need to know to start your week.
- Powell, Yellen testimony
Powell and Yellen testify before the House Financial Services Committee on Tuesday and the Senate Banking Committee on Wednesday where they will discuss the health of the U.S. economy and the importance of fiscal and monetary stimulus in the recovery from the pandemic.
There are also more than half a dozen other Fed officials due to speak during the week, including Vice Chairman Richard Clarida, Vice Chairman Randal Quarles, Fed Governor Lael Brainard, and New York Fed President John Williams.
Financial markets have diverged from the Fed on the possible future outlook for monetary policy, sending yields on U.S. Treasuries to their highest in more than a year.
Investors are pricing in a first rate hike sooner than the Fed currently expects, amid fears that the economy could overheat as it recovers from the pandemic given President Joe Biden’s massive stimulus package combined with the Fed’s easy money policy.
- BIS summit
Before his joint testimony to Congress with Yellen, Powell is scheduled to speak Monday at the start of a four-day conference organized by the Bank for International Settlements on innovation in the digital age.
Other global central bank leaders who will be speaking at the summit include European Central Bank President Christine Lagarde, Bank of England Governor Andrew Bailey and Bank of Canada head Tiff Macklem.
Meanwhile, a host of central banks are due to hold policy meetings during the week, including in Switzerland, Mexico, and South Africa.
The Swiss National Bank is expected to keep rates unchanged -0.75%, the lowest in the world, and maintain its interventionist stance at its meeting on Thursday.
- S. economic data
On the data front, durable goods orders and the personal income and spending reports are set to be the highlights of the week, along with figures on new and existing home sales.
The housing data together with the personal income and spending figures, which includes the PCE deflator, the Fed’s preferred inflation measure, will probably show weakness, due to the impact of severe winter storms on economic activity in February. However, economists expect the slump to be short-lived.
The U.S. is also to publish the latest revision of fourth quarter 2020 GDP, which was last reported at an annualized 4.1%.
- Stock market volatility
Investors are likely to remain focused on the rise in bond yields that has pressured share prices, even though indexes remain close to their record highs.
Optimism about the prospects for the economic recovery has accelerated a shift into bank and other value stocks, powering the S&P 500 and the Dow to record levels last week.
But the Nasdaq has lagged as technology and high-growth stocks have lost favor in recent months, with their valuations looking less attractive as Treasury yields rise.
Investors may also begin to fret that about the prospect of higher taxes that could threaten the rally in U.S. stocks as the Biden administration looks for ways to pay for its spending plans.
- Euro zone, UK data
In the euro zone, PMI data for March will shed light on how the bloc’s economy is performing against the background of a chaotic vaccine rollout.
The UK is to release a mass of data, starting with the latest jobs data on Tuesday. Economists are expecting the unemployment rate to remain stable. Inflation data on Wednesday is expected to tick higher while PMI data the same data is expected to show the dominant services sector rebounding on optimism about the reopening.
Retail sales figures out on Friday are expected to show a partial recovery following a steep drop in January. All the reports taken together could indicate that the UK economy is emerging from the worst of the pandemic crisis.
