Investing.com - This week investors will have a chance to parse a fresh batch of economic data to gain insights into the health of the global economy and whether central banks will stick to an accommodative monetary policy path.
Eurozone GDP, U.S. inflation and retail sales from the U.S. and U.K. will all be closely watched. Moves in the Chinese yuan will also remain in focus amid doubts over whether a U.S. China trade deal will ever be done. The week also features corporate earnings reports from major retailers, including Walmart and Macy’s.
Here’s what you need to know to start your week.
1. Eurozone GDP
On Wednesday, quarterly flash gross domestic product data for both Germany and the wider euro zone is released. The consensus forecast is the euro zone GDP grew 0.2% in the second quarter but in Germany - the bloc's largest economy - it's expected to have shrunk 0.1%.
The export-reliant German economy is being hard hit by the trade war between Washington and Beijing and concerns are growing that it may be heading into a recession after industrial output figures for June pointed to the biggest annual decline in nearly a decade.
At the end of the week the euro area is to publish its latest trade figures.
2. Yuan moves
Fluctuations in the value of the Chinese yuan will remain in the spotlight as investors try to work out whether a drop below the 7 per dollar level represents a deliberate strategy by Beijing to devalue the currency in response to the Trump administration’s tariff threats.
Chinese trade data last week showed that, with falling imports and exports, Beijing needs a weaker currency to support its economy.
A deliberate push to weaken the yuan could trigger a currency war that may force other regional central banks to slash interest rates. Escalating tensions between the U.S. and China have sent stocks and bond yields plunging, emerging-market currencies tumbling and sparked a flight to the safety of dollars, gold, bitcoin and the yen.
3. U.S. economic data
After an escalation of the U.S.-China trade row sparked one of the most volatile weeks of the year for U.S. stock and bond markets, investors will be focusing on the U.S. economy's ability to absorb the impact of a trade war with some critical health checks.
U.S. July consumer price inflation, due Tuesday, has been tame in recent years and consistently below the Federal Reserve's 2% target. Federal Reserve Chairman Jerome Powell said the strong tie between unemployment and inflation was broken 20 years ago and the relationship "has become weaker and weaker and weaker."
But market watchers are in for deluge of data on Thursday, including July retail sales and industrial production, both of which are expected to show growth. The August Philadelphia Fed index, the NAHB housing market indicator and weekly jobless numbers are also due for release.
A quarter-point cut at the Fed's next meeting on Sept. 18 is now almost fully priced. Markets see one chance in four of a larger 50-basis-point rate cut next month.
4. U.K. data
In what is set to be a hectic week on the U.K. economic calendar, investors will get the June employment report, as well as figures on retail sales and inflation. Retail sales are expected to have declined 0.3% last month after posting a surprise increase of 1% in June.
The reports will help Bank of England policymakers determine whether the economy needs tightening or easing of monetary policy after official data on Friday showed that the U.K. economy contracted in the second quarter for the first time in nearly seven years.
5. Retail earnings
Retailers reporting this week include Walmart (NYSE:WMT), Macy’s (NYSE:M), struggling department store chain J.C. Penny and Tapestry whose brands include Coach, Kate Spade and Stuart Weitzman. Other retail earnings include Alibaba (NYSE:BABA) and JD.com.
The S&P Consumer Discretionary index which includes big retailers, is expected to report a 1.2% increase in second-quarter earnings, according to IBES data from Refinitiv.
But estimates for the rest of the year have been falling. Wall Street now expects third-quarter earnings growth of 1.8% compared with a 6.8% expectation on July 1 while the fourth-quarter estimate has fallen to 6.5% from 9.8%.
--Reuters contributed to this report