Trend followers stage recovery as stretched S&P, Nasdaq longs fuel gains
Investing.com - Data is once again likely to be at the front of investors’ minds this week, as uncertainty clouds the outlook for the U.S. economy -- and, by extension, the Federal Reserve’s all-important interest rate policy. President Donald Trump and Russia’s Vladimir Putin are set to meet face-to-face, potentially to discuss a Ukraine peace deal. Meanwhile, more earnings are due out in the coming days, and the deadline for the expiration of a fragile U.S.-China tariff truce approaches.
1. Economic data in focus
On the economic calendar, traders will be keeping particularly close tabs on the release of U.S. consumer price data for July on Tuesday.
A separate gauge of producer prices for final demand is due out on Thursday, while a metric of American retail sales and a survey of consumer sentiment are expected to be published on Friday.
Along with the labor market, inflation remains the other crucial pillar of the Federal Reserve’s two-pronged mandate. The outlook for rates has been complicated by data earlier this month which showed weak job growth in July and a sharp downward revision to the numbers for June and May -- all indications of a cooling labor market which may bolster the case for rate cuts that could fuel investment and spending.
Yet, at the same time, inflation has remained stubbornly elevated above the Fed’s stated 2% target, driving worries that a reduction in borrowing costs could spur inflationary pressures.
2. Trump-Putin summit
Attention is likely to shift to the remote U.S. state of Alaska on Friday, when U.S. President Donald Trump and Russian counterpart Vladimir Putin are set to meet to discuss a possible Ukraine peace deal.
Ahead of the summit, Trump suggested that a potential agreement to end the more than three-year old conflict in Ukraine could see the swapping of territory by both sides. Trump first announced the meeting with Putin last Friday, the same day as a self-imposed deadline for Moscow to present Washington with a ceasefire or incur further sanctions.
The absense of Ukrainian leader Volodymyr Zelenskiy from the meeting has raised some concerns around the terms of any accord, with worries swirling around whether the country will have a deal effectively dictated to it by the U.S. and Russia.
However, Zelenskiy still has the backing of the NATO alliance and many European countries, who have stressed that Kyiv cannot be sidelined during the negotiations. U.S. Vice President JD Vance has also said that the White House is working to put together a meeting that would include Trump, Putin and Zelenskiy.
Three rounds of discussions between Ukraine and Russia in recent months have failed to yield an end to the hostilities.
3. More earnings ahead
More U.S. corporate results are due out this week, as a multi-week stream of second-quarter earnings ebbs.
Among the headliners this week will be returns from tech group Cisco Systems (NASDAQ:CSCO) and chipmaking equipment supplier Applied Materials (NASDAQ:AMAT), which could provide a fresh glimpse into the state of booming enthusiasm around artificial intelligence.
Tractor firm Deere & Company (NYSE:DE) is also expected to report on Thursday. The group previously flagged in May that Trump’s aggressive tariff agenda was pushing up production costs, but predicted that second-quarter figures would be bolstered by expense-saving and inventory-management measures.
Despite fears over the impact of tariffs on the broader economy, the latest earnings season has been largely solid. With more than 90% of the benchmark S&P 500 having reported quarterly results, some 81% have posted better-than-anticipated income per share and revenue, according to FactSet data.
4. U.S.-China trade detente deadline
A trade truce between the U.S. and China is due to expire on August 12, with speculation swirling around whether the two countries will ultimately extend their fragile arrangement.
In the wake of the latest bilateral gathering in July, Chinese officials sounded a positive note that the deal to avoid the re-imposition of sky-high tit-for-tat tariffs could be extended for a further 90 days. Negotiators from Washington, however, stressed that ultimately such a decision would come from Trump.
As of Monday morning, no such announcement had been made, and Trump has offered few hints that he is open to an extension. Over the weekend, Trump called on China to "quadruple its soybean orders."
Despite the detente, trade between the world’s two largest economies has been significantly impacted. Recent data showed that China’s exports to the U.S. contracted for a fourth consecutive month in July and are now down by 21.7% from a year ago.
5. China retail sales and industrial production figures
Analysts will have the chance to pour through a new ream of Chinese economic data this week, including industrial production and retail sales figures for July on Friday.
In June, industrial output in China climbed by 6.8% versus a year earlier, accelerating from 5.8% in May and topping forecasts.
However, growth in retail sales, a key measure of consumer demand, slowed to 4.8% from 6.4% in May.
Along with elevated U.S. tariffs, China has long been grappling with tepid consumption activity and a protracted property crisis, leading some economists to argue that Beijing may need to roll out more stimulus measures to help prop up the economy.