Rising tensions between Moscow and the West over Ukraine and speculation about monetary policy look set to keep investors on edge in the coming holiday-shortened week.
Concerns over elevated inflation will also remain to the fore with the release of a key U.S. inflation metric along with a string of earnings results from major U.S. retailers.
Oil prices will remain in focus, while the U.K. and the Eurozone are to release PMI data that may show the economic impact of easing Covid-19 restrictions.
Here's what you need to know to start your week.
The U.S. market will be closed on Monday for the Presidents' Day holiday, but investors are likely to be facing another choppy week as fears over a potential Russian invasion of Ukraine underpins demand for safe-haven assets.
Ongoing uncertainty over the Federal Reserve’s next policy move is also likely to continue to weigh on equities.
The Fed has signaled that it will hike interest rates at its upcoming meeting in March to bring down inflation.
Which has surged past the central bank’s 2% target to hit its highest levels in four decades, but it has not indicated how aggressively it will act.
St. Louis Fed President James Bullard has called for aggressive steps to curb inflation, while New York Fed chief John Williams said Friday he sees little need for the central bank to go big at the start of its rate-hike cycle.
"This is a confusing market, confused about Ukraine, confused about how aggressive the Fed is going to be, And pretty much ignoring very strong earnings results from the fourth quarter," Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York told Reuters.
Amid speculation over the prospect of a half percentage point rate increase from the Fed in March Friday’s data on the personal consumption expenditures price index will be closely watched.
The PCE price index, rumored to be the Fed's favorite inflation measure is forecast to have risen 6% year-over-year in January, while the core reading, which excludes food and fuel prices, is expected to rise 5.2%.
The PCE data is released as part of the report on personal income and spending.
Other economic data on Friday includes revised data on consumer sentiment, pending home sales numbers for January, and a report on durable goods orders, also for January.
There will also be speeches from several Fed officials during the week, including Richmond Fed President Tom Barkin.
San Francisco Fed President Mary Daly, Cleveland Fed President Loretta Mester, and Fed Governor Christopher Waller.
After a strong rebound in January retail sales, consumers are back in focus and a string of earnings results from major retailers this week will be parsed for signs of how surging inflation is affecting spending.
Despite the rebound in retail sales, consumer sentiment has dropped to a decade low in recent months leading to fears that the economic recovery could stall.
Home Depot (NYSE: HD), Lowe's (NYSE: LOW), Macy's (NYSE: M), and Foot Locker (NYSE: FL) are among those scheduled to report fourth-quarter results during the week.
Other companies reporting earnings include Anheuser Busch Inbev (NYSE: BUD), Alibaba (NYSE: BABA), Caesars Entertainment (NASDAQ: CZR), Krispy Kreme (NASDAQ: DNUT), and Beyond Meat (NASDAQ: BYND).
In addition to bottom lines, investors will be looking to see how companies are dealing with the supply chain crunch and their views on inflation
Oil prices could be set for another mixed week as energy traders weigh a potential supply disruption resulting from the Russia-Ukraine crisis against the prospect of increased Iranian oil exports.
Fears over possible supply disruptions from sanctions on top exporter Russia if it attacks Ukraine have supported prices, which have also been underpinned by a recovery in demand from the pandemic.
U.S. crude prices are hovering around $91 a barrel and last week reached their highest level since 2014, while the price for Brent, the global benchmark, is near seven-year highs.
Higher oil prices are contributing to soaring inflation, adding to concerns that the Fed will need to aggressively tighten monetary policy to curb consumer prices.
Investors will also have the chance to measure the effect of higher oil prices on energy companies’ earnings this week when Occidental Petroleum (NYSE: OXY), EOG Resources (NYSE: EOG), NRG Energy (NYSE: NRG), Chesapeake Energy (NYSE: CHK) and Coterra Energy (NYSE: CTRA) all report.
The U.K. and the Eurozone are to release PMI data for February on Monday that may show a boost to economic activity with governments removing more pandemic era restrictions. Germany’s Ifo business climate index on Tuesday will also be closely watched.
Positive signs of an economic recovery could encourage central banks to unwind post-pandemic stimulus fast.
The Bank of England is on track to raise rates again in March while European Central Bank policymakers are still debating whether rates will need to rise this year in order to curtail inflation.
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BoE Governor Andrew Bailey along with several policymakers are due to appear before Parliament's Treasury Committee on Wednesday to answer questions on inflation and the economic outlook.