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By Noreen Burke
Investing.com — Third quarter earnings season kicks off this week with JPMorgan Chase and other big banks reporting. Figures on U.S. inflation will be closely watched while the Federal Reserve is set to publish the minutes of its September policy meeting, during which officials said they would begin stimulus tapering by the end of this year. The International Monetary Fund and the World Bank are to start their annual meeting on Monday, but a controversy over IMF chief Kristalina Georgieva has already overshadowed proceedings. In the UK, data releases will focus attention on the health on the economy amid growing expectations for rate hikes as inflationary pressures mount. Here’s what you need to know to start your week.
Some of the world's biggest banks kick off U.S. earnings, with investors focused on global supply chain problems, labor shortages and the upcoming tapering of the Fed's $120 billion monthly stimulus.
JPMorgan Chase (NYSE:JPM) and BlackRock (NYSE:BLK) report on Wednesday followed by Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) later in the week.
Banks smashed profit estimates in the second quarter as the economy rebounded, with Wells Fargo, Bank of America, Citigroup (NYSE:C) and JPMorgan Chase posting a combined $33 billion in profits.
That momentum likely slowed in the third quarter; earnings for financials are forecast to grow by 17.4%, versus nearly 160% in Q2, according to I/B/E/S data from Refinitiv.
"I think it’s going to be a dicey earnings season," warned Liz Young, head of investment strategy at SoFi in New York. "If supply-chain issues are driving up costs, a company with strong pricing power can pass through those rising costs. But you can’t pass through a labor shortage if you can’t find workers to hire."
The key U.S. economic report to watch this week is Wednesday’s data on consumer price inflation for September. While the rate of price increases has moderated inflation is still higher than it was pre-pandemic with the surge in demand after the economy reopened pushing up prices.
Producer price inflation figures are due out on Thursday, followed by data on retail sales on Friday. Retail sales are expected to be pulled lower because of a plunge in vehicle sales amid supply chain bottlenecks, but excluding vehicles, retail sales are forecast to increase.
The Fed is to publish its September meeting minutes on Wednesday amid expectations that it will begin tapering asset purchases before the end of this year, an important first step towards eventual rate hikes.
Friday’s weaker-than-expected September jobs report did little to alter expectations the Fed could begin to scale back stimulus by the years end.
Though the economy added just 194,000 jobs in September upward revisions to prior months' data meant that all told the economy has now regained half of the jobs deficit it faced in December, compared with pre-pandemic employment levels.
Fed Chair Jerome Powell said last month that he'd only need to see a "decent" September U.S. jobs report to be ready to begin to taper in November.
IMF, World Bank annual meetings
Annual meetings of the World Bank and the IMF get underway Monday, where officials will discuss the global economy, the ongoing COVID-19 pandemic and global taxation issues.
But the high-profile event has been overshadowed by a data-rigging scandal that threatens the career of IMF managing director Kristalina Georgieva.
It has been alleged that Georgieva pressured World Bank staff to change data to favor China in 2017, when she was the chief executive of the bank.
The allegations – strongly denied by Georgieva - will cast a cloud over the fund's initiatives to aid the world's post-pandemic recovery.
A decision on Georgieva's future at the IMF is not expected until Monday, at the earliest.
With the UK economy showing signs of slowing amid rising prices, supply chain disruptions and staff shortages, upcoming economic data releases will grab the spotlight.
On Tuesday, the claimant count change for September is published, together with August unemployment and wage data. GDP data for August will be released on Wednesday, alongside industrial and manufacturing data.
Markets are betting the Bank of England might become the first major central bank to raise rates since the pandemic struck.
On Saturday BoE official Michael Saunders said in an interview in the Telegraph newspaper that households should get ready for "significantly earlier" interest rate hikes as inflation pressure mounts.
-Reuters contributed to this report