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Friday’s all important non-farm payrolls report will be the highlight of the economic calendar in the coming week as markets try to gauge the future direction of U.S. interest rates. The European Central Bank is likely to deliver a rate cut that will put the Eurozone on a diverging rate path from the U.S. Meanwhile, OPEC is to decide on output cuts and the Bank of Canada will deliver its latest rate decision. Here's your look at what's happening in markets for the week ahead.

1. Jobs numbers

Fridays closely watched nonfarm payrolls report is expected to show that the U.S. labour market remained strong again in May. Economists are expecting the economy to have added 185,000 jobs, a modest uptick from the prior month.

Investors had been worried that an overly strong economy might prevent the U.S. Federal Reserve from lowering rates this year at all, or even require a rate rise. But those concerns were alleviated last month, albeit temporarily, by data showing slowing inflation and a cooling labour market.

Still, policymakers have urged patience on rate cuts, saying they would like to see several months of data to be sure inflation is heading back towards their 2% target. The employment report could prove the economy is losing steam if it shows the slowdown in job creation has continued.

2. ECB rate decision

The ECB is all but certain to become the first major central bank to cut interest rates this cycle on Thursday.

With a 25 basis point rate cut all but promised by policymakers market watchers will be focusing on what ECB President Christine Lagarde has to say about what comes next.

Inflation in the bloc's dominant services sector remains sticky and its economy is recovering faster than expected, while a closely watched wage growth figure accelerated last quarter, leaving the outlook beyond June less certain.

Markets are still expecting the ECB will cut rates multiple times this year compared the Fed and the Bank of England though bets on future moves have been trimmed back.

They now expect two cuts and less than a 50% chance of a third - compared with three when the ECB last met and at least five at the start of the year.

3. OPEC output cuts

OPEC+ will likely agree on Sunday to prolong its deep oil output cuts into 2024 and possibly 2025 Reuters reported, as the group seeks to shore up the market amid tepid global demand growth, high interest rates and rising rival U.S. production.

Oil prices are trading near $80 per barrel, below what many OPEC+ members need to balance their budget. Worries over slow demand growth in top oil importer China have weighed on prices and oil market analysts expect OPEC+ to extend cuts to balance supply.

The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, has made a series of deep output cuts since late 2022.

OPEC+ members are currently cutting output by a total of 5.86 million barrels per day (bpd), or about 5.7% of global demand.

4. Wall Street

Despite all three major U.S. stock indexes posting losses last week they still ended the month higher, with the S&P 500 rising about 4.8%, the Nasdaq jumping 6.9% and the Dow climbing 2.4%.

While it’s been a banner year for the major U.S. stock indexes, one economically sensitive corner of the market remains a sore spot.

The Dow Jones Transportation Average has fallen about 5% so far this year and some investors have said the struggles for the 20-stock transport index - which includes railroad operators, airlines, package shipping companies and trucking firms - could signal weakness in the economy or prevent the broader market from making significant further gains unless they bounce back.

The Dow transports are "a barometer for future economic activity," Chuck Carlson, chief executive officer at Horizon Investment Services told Reuters. "They may be indicating that while a recession isn't imminent, that there is probably a slowdown in the economy that's ahead here."

5. Bank of Canada

The BoC is widely expected to deliver a 25-basis point rate cut at its upcoming meeting on Wednesday after data on Friday showed the country’s economy expanded at a slower than expected pace in the first quarter.

The GDP report indicated that Canada's economy did not rebound from a soft patch last year as strongly as data initially suggested and may convince the central bank to start lowering borrowing costs.

"All ducks appear to be in a row for the Bank of Canada to kick-start the policy easing cycle and lower the overnight rate by 25 basis points to 4.75% on Wednesday," RBC said in Friday note.

At the central bank’s last meeting in April Governor Tiff Macklem noted that the requirements for a rate cut appeared to be in place but that officials needed to see more evidence on slowing inflation.

The economic outlook grew "somewhat more pessimistic" continued to expand in recent weeks, but consumers are starting to feel the inflation pinch as wage growth continues to normalize toward pre-pandemic historical averages, according to the Federal Reserve's Beige Book released Wednesday.

"National economic activity continued to expand from early April to mid-May," though overall outlooks "grew somewhat more pessimistic amid reports of rising uncertainty and greater downside risks," the Fed said in its Beige Book economic report, based on anecdotal information collected by the Fed's 12 reserve banks through May 20.

In a sign of cooling in the labor market, the majority of districts noted "better labor availability, though some shortages remained in select industries or areas," the Fed's beige book showed, and flagged the slowing wage growth.

"Several districts reported that wage growth was at pre-pandemic historical averages or was normalizing toward those rates," the report added.

Against the backdrop of cooling wage growth, retail spending was flat to up slightly, reflecting "lower discretionary spending and heightened price sensitivity among consumers," according to the report.

On the inflation front, meanwhile, prices increased at a modest pace over the period, the report noted, with "price growth is expected to continue at a modest pace in the near term."

Inflation data out of the U.S., the euro zone and Japan will be front and center in the holiday-shortened week ahead. The health of China’s manufacturing sector will also be in the spotlight, while concerns over the demand outlook may continue to weigh on oil prices. Here's your look at what's happening in markets for the week ahead.

U.S. inflation data

The Fed’s favourite inflation gauge - the personal consumption expenditures (PCE) price index - due on Friday will be closely watched for clues about the direction of interest rates over the rest of the year.

The data comes as markets are becoming resigned to the higher-for-longer interest rate narrative after last week's Fed minutes, along with cautious sounding remarks from policymakers who expressed doubt whether inflation is indeed on a reliable downward trajectory.

Investors will also get the chance to hear from several Fed speakers during the week including Governor Michelle Bowman, Cleveland Fed President Loretta Mester, Governor Lisa Cook, New York Fed President John Williams and Atlanta Fed President Raphael Bostic.

The economic calendar also features revised data on first quarter economic growth on Thursday and the Fed’s Beige Book on Wednesday.

Euro zone inflation

The European Central Bank has all but promised to lower interest rates from a record high of 4% in at its upcoming June meeting, but it remains to be seen how quickly it will cut rates after that, particularly if inflation data out on Friday shows price pressures remain volatile.
Economists expect euro zone inflation to tick up 2.5% in May year-on-year, from 2.4% in April, while underlying inflation is seen holding steady at 2.7%.

This alone is unlikely to deter the ECB from cutting in June but some officials are already arguing against the need to ease any further.

The economic calendar for the bloc also features Germany’s Ifo business climate index on Monday, and the ECB’s survey of inflation expectations on Tuesday.

Japan data

Tokyo inflation data due on Friday will be closely watched as markets try to gauge when the Bank of Japan could next raise rates.

The figures come two weeks before the BOJ's next monetary policy meeting, where some are betting the central bank could deliver its second rate rise after March's historic move.

Policymakers are facing mounting pressure to hike rates amid ongoing weakness in the yen which hurts consumption by inflating the cost of raw material imports.

Also Friday, the Ministry of Finance is to release intervention data which covers the recent rounds of suspected intervention and the BOJ's bond buying schedule, where traders will look out for cuts in the amount of central bank purchasing.

China activity

China is to release data on industrial profits for the year to date on Monday with market watchers eager to see whether profits rebounded in April after a sharp decline the prior month slowed the pace of gains for the first three months to 4.3%.

China is to release its official manufacturing and non-manufacturing PMIs on Friday. Economists are expecting the manufacturing index to remain just above the 50 threshold that separates growth from contraction for a third month in May.

Beijing has set an ambitious economic growth target of around 5% for this year, which many analysts say will be a challenge to meet as prolonged weakness in the property sector and tepid consumer demand remain a drag on the world’s second largest economy.

5. Oil prices

Oil prices rose about 1% on Friday but posted a weekly loss on worries that strong U.S. economic data would keep interest rates elevated for a longer period, curbing fuel demand.

Brent closed down 2.1% for the week. It declined for four straight sessions last week, its longest losing streak since Jan 2. U.S. crude settled down 2.8% for the week.

Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.

Oil demand is still robust from a broader perspective, analysts at Morgan Stanley wrote in a note, adding they expect total oil liquids consumption to increase by about 1.5 million barrels per day this year.

Soft U.S. gasoline demand has been offset by global demand, which surprised to the upside, especially in the early parts of the year, the analysts said.

The Federal Reserve is to publish the minutes of its latest meeting and several Fed officials are to deliver remarks as renewed expectations for rate cuts power markets higher. AI darling Nvidia (NASDAQ:NVDA) is to report earnings, PMI releases will give insights into the health of the global economy, while the U.K. is to release what will be closely watched inflation data and the Reserve Bank of New Zealand meets. Here’s what you need to know to start your week.

Fed minutes, speakers

On Wednesday the Fed is due to publish the minutes of its April 30-May 1 meeting, when Fed Chair Jerome Powell indicated that rates are likely to remain higher for longer amid lingering inflation pressures.

Since then, a report last week showed that U.S. consumer prices increased less than expected in April, indicating that inflation resumed its downward trend at the start of the second quarter.

Several Fed officials are also due to speak during the week, including Atlanta Fed President Raphael Bostic, Governors Michael Barr, Christopher Waller and Philip Jefferson, Cleveland Fed President Loretta Mester, New York Fed President John Williams and Richmond Fed President Thomas Barkin.

The economic calendar also includes reports on new and existing home sales, durable goods orders and consumer sentiment.

Nvidia earnings

Nvidia's quarterly results on Wednesday could set the tone for U.S. stock markets and reverberate through companies exposed to the burgeoning artificial intelligence field.

The semiconductor company at the centre of the excitement over AI's business potential is expected to report a massive jump in revenue and profit for its fiscal first quarter.

Revenue is expected to rise to $24.8 billion, from $7.2 billion a year earlier, with earnings per share soaring to $5.57 from $1.09, according to LSEG data cited by Reuters.

Nvidia may need to meet those lofty expectations and then some to keep its soaring stock price moving higher. Shares have jumped over 90% this year after more than tripling in 2023, making the AI darling the third-largest U.S. company by market value.

PMI data

The U.S., China, the euro zone and the U.K. are all to release May PMI data that should reinforce a brighter global economic outlook.

A slow euro area recovery appears to be underway after six straight quarters of stagnant or negative growth, U.S. inflation just resumed its downward trend and China grew faster than expected in the first quarter.

So, global PMIs should stay on the right side of the line between expansion and contraction.

Yet steep U.S. tariff increases on Chinese imports from electric vehicle batteries to computer chips highlight a fragile outlook for global trade and growth. China has vowed retaliation.

Manufacturers in Germany, Europe's biggest economy, are already experiencing shifts in world trade and geopolitics. Heightened trade tensions - with a U.S. election looming - could hurt them further, upend China's recovery and reignite U.S. inflation.

U.K. inflation data

The U.K. is to publish April CPI data on Wednesday with economists expecting the annual rate of inflation to have slowed dramatically - by more than a percentage point - to near the 2% level targeted by the Bank of England.

There is one more inflation report due out ahead of the next BoE meeting on June 20 and sustained evidence of cooling price pressures could give officials all the encouragement they need to cut interest rates.

Ahead of the inflation numbers BoE Governor Andrew Baily is due to deliver remarks on Tuesday.

The U.K. economic calendar also features April retail sales data on Friday.

RBNZ decision

The Reserve Bank of New Zealand is expected to leave rates unchanged on Wednesday for a seventh straight meeting, against a background of persistent inflation and a stalling economy.

The RBNZ was the first major central bank to ease at the start of the pandemic, and the first to hike in the aftermath.

Market bets for an eventual rate cut in October put it behind the European Central Bank which is expected to move in June, followed by the BoE in August and the Fed in September. Switzerland and Sweden have started easing.

The RBNZ itself is even less optimistic, projecting no rate cuts until next year.

Baidu Inc (HK:9888) (NASDAQ:BIDU) was downgraded by Morgan Stanley on Friday, with the brokerage citing a weak outlook for the Chinese internet firm’s advertising revenues, while monetization of its artificial intelligence forays is also expected to take time.

Morgan Stanley downgraded Baidu’s American shares to “equal-weight” from “overweight”, and also trimmed its price target to $125 from $140. The new PT represents an upside of 11% from current levels.

The downgrade comes after Baidu clocked some softer earnings for the first quarter, especially as weak Chinese economic conditions weighed on its core advertising revenues.

The firm, which is China’s biggest internet search engine, saw some boosts to revenue from its AI measures- specifically its ChatGPT-like Ernie bot and from AI-driven demand for its cloud services. But this was also offset by much higher expenses on Baidu’s AI development.

Morgan Stanley analysts said weakness in Baidu’s ads division was set to continue, and that transformation of its traditional businesses into AI offerings was “slow and lagged on user retention.”

Growth in Baidu’s cloud services is set to improve, Morgan Stanely said, citing increased demand from AI-linked enterprise-level partnerships. The firm’s margins are also expected to remain largely stable, with capex expected to have peaked in 2023 with the procurement of AI-related chips and the scaling down of less profitable units.

Baidu is trading up about 17% so far in 2024 on hype over its AI offerings. But Morgan Stanley said it saw limited near-term catalysts for further gains.

The firm has made several attempts to diversify beyond its core ads and search engine revenues. Recently, it announced a partnership with electric vehicle maker Tesla Inc (NASDAQ:TSLA), under which its maps data and AI software will be used for navigation by Tesla vehicles in China.

Walmart (NYSE:WMT) has reported first-quarter income and revenue that topped analysts' expectations, as the bargain-cost big-box store was boosted by strength in its e-commerce business.

The Arkansas-based group known for its cut-price merchandise has faced increasing competition from the likes of Amazon (NASDAQ:AMZN) and PDD Group's Temu in its bid to secure rising demand from digital shoppers in the U.S. Online retail spending in the country spiked by 7% between January to April as price-conscious consumers searched for deals, according to a report from Adobe (NASDAQ:ADBE) Analytics last week.

Solid performance at its pick-up and delivery service drove a 22% uptick in Walmart's e-commerce sales in the U.S. during the three months ended on April 30. Globally, e-commerce sales surged by 21% as Walmart said the presence of its digital offerings "is higher across all markets."

Walmart noted its "value-convenience proposition" is resonating in particular with customers in the U.S., adding that it has even seen share gains in upper-income households that have recently chosen pricier shopping alternatives. The company's members-only unit, Sam's Club, also posted "solid" sales growth that was fueled by demand for grocery and other essential items.

Net sales in the U.S. climbed by 4.6% versus the year ago period to $108.7 billion. Total revenue, meanwhile, spiked by 6% to $161.51 billion, above projections of $159.58 billion.

Adjusted earnings per share of $0.60 beat Bloomberg consensus estimates of $0.53, thanks in part to a $1.6 billion decline in inventories to $55.4 billion. Elevated inventories have threatened to push up Walmart's costs and dent margins.

The firm said that it now expects consolidated net sales and adjusted operating income in its 2025 fiscal year to be at the "high-end or slightly above" its original guidance. Consolidated net sales were previously seen increasing by 3.0% to 4.0%, while operating profit was predicted to advance by 4.0% to 6.0%.

Shares in Walmart rose in premarket U.S. trading on Thursday.

U.S. inflation data will be front and center this week and could be the deciding factor in the near-term direction for markets. Meanwhile, retail sales data along with earnings results from some big-name retailers will give fresh insights into the strength of consumer spending, a key driver of the economy. The UK and China are to release what will be closely watched economic data. Here’s what you need to know to start your week.

Inflation numbers

Investors will be looking at the U.S. producer price index and consumer price index data this week for any indication that price pressures are finally easing after months of strong inflation gave rise to fears that the Federal Reserve may not cut interest rates this year.

Markets got some relief earlier this month when Fed Chair Jerome Powell indicated that the central bank was still looking to eventually cut rates and the latest U.S. employment report showed signs of cooling in the labor market.

Analysts expect Wednesdays crucial CPI report to show underlying inflation rising 3.6% on a year-over-year basis, which would be the smallest increase in over three years.

But a hotter-than-expected inflation reading would likely price out rates cuts for the rest of the year, reigniting market volatility.

Retail earnings

Investors will get some fresh insights into the health of the U.S. consumer this week with April retail sales data on Wednesday, plus earnings results from major retailers Walmart (NYSE:WMT) and Home Depot (NYSE:HD).

So far, bullish investors have gained confidence from a solid earnings season. Standouts included generally strong reports from most of the so-called Magnificent Seven tech and growth giants whose shares helped propel the market higher last year and continue to have a huge weighting in the S&P 500.

Strong earnings have “got investors feeling more comfortable about being in this market," Art Hogan, chief market strategist at B Riley Wealth told Reuters. However, “the trajectory of inflation is always going to be important to us while we're in a cycle where we expect the next thing for the Fed to do is to cut rates."

China data

China is to publish a string of economic data on Friday that will show how the world’s number two economy was performing at the start of the second quarter.

April home price data will give fresh insights into the state of the property sector which has been engulfed by a debt crisis for about three years now, leaving property developers on the brink of collapse.

Industrial production, retail sales and fixed asset investment are seen accelerating year on year.

Comments from policymakers at last month’s Politburo meeting have primed investors for a wave of stimulus measures from Beijing to boost economic recovery, keeping the market mood buoyant for now.

UK data

Last week the Bank of England moved closer to cutting interest rates, but markets are divided on whether a first cut will come at the bank’s next meeting in June or whether policymakers will hold out for longer.

Two official sets of employment data and two rounds of inflation figures are due before the BoE’s next meeting on June 20.

The first of the two jobs reports on Tuesday will be closely watched for signs that pay increases are fueling price pressures. Annual pay growth is still running hot, while labor supply is stagnating.

Economists are expecting average weekly earnings, excluding bonuses, to have risen by an annual 5.9% in the first quarter. While still solid, signs that wage growth is moderating would likely bolster expectations for a June cut.

Oil prices

Oil prices ended last week little changed with Brent logging a 0.2% loss, while crude futures recorded a rise of 0.2%.

Expectations that U.S. interest rates could remain higher for longer have weighed on oil prices as higher interest rates typically slow economic activity and weaken oil demand.

The stronger U.S. dollar has also weighed, making greenback-denominated commodities more expensive for buyers using other currencies.

Oil prices have also been pressured by rising U.S. fuel inventories coming into the typically robust summer driving season.

Prices found some support after data on Thursday showing China imported more oil in April than the same month last year. China's exports and imports returned to growth in April after contracting the previous month.

Energy traders will be looking at this week’s inflation data which will dictate the future direction of interest rates.

The Federal Reserve signaled interest rates could likely remain higher for longer than previously expected on stalling disinflation, but downplayed the possibility of rate hikes following an unchanged rate decision on Wednesday.

In recent months, there "has been a lack of further progress toward the Committee's 2 percent inflation objective," the Federal Open Market Committee, the FOMC, said in a statement as it kept its benchmark rate in a range of 5.25% to 5.5%.

Since the turn of the year, inflation data have surprised to the upside, forcing investors to rein in their bets on rate cuts. Investors now only expected one rate cut this year, according to Investing.com’s Fed Rate Monitor Tool, well below the six or seven seen at the start of the year.

In the press conference that followed the monetary policy statement, Fed chairman Powell acknowledged that the recent upside surprises in the inflation data would likely delay the start of rate cuts, but also ruled out the prospect of resuming rate hikes.

"it is unlikely that next policy rate move would be a hike," Powell said Wednesday, though acknowledged that progress on inflation had stalled in recent months.

"So far this year, the data have not given us that greater confidence" to begin rate cuts, Powell said Wednesday. It is likely that gaining such greater confidence will take longer than previously expected," the chief added.

The Fed also said it would begin to slow its balance sheet reduction, or quantitative tightening program next month, which was launched in 2022 to shrink the assets it holds on its balance sheet.

Beginning in June, the Fed will allow about $25 billion in Treasury securities to roll off its balance sheet a month, down from the current monthly pace of $60 billion.

The $25B cap in the amount of Treasuries that the Fed will allow to roll off its balance sheet is "below our $30bn expectation, which implies a marginally slower pace of runoff, but not by much," BofA said in Wednesday note.

"The justification for taper was widely telegraphed and did not come as a surprise," it added.

It’s set to be another hectic week in markets with the Federal Reserve’s latest policy meeting front and center. The U.S. is to release its latest employment report on Friday and the last of the "Magnificent Seven" big tech names are to report earnings. Meanwhile the euro zone and China are to release what will be closely watched economic data. Here’s what you need to know to start your week.

1. Fed decision

Investors will be awaiting indications about whether the Fed still expects to cut interest rates at some stage this year when officials conclude their two-day policy meeting on Wednesday. Fed Chair Jerome Powell has said the central bank needs more confidence that inflation is heading towards its 2% goal before cutting rates.

Friday’s inflation data for March, which was broadly in line with consensus, did little to alter market expectations for a first rate cut in September.

Expectations for interest rate cuts have faded as data on the labor market and inflation continued to surprise on the upside. Financial markets initially expected the first rate cut to come in March. That expectation got pushed back to June and then September.

2. Nonfarm payrolls

Friday’s monthly jobs report will give a fresh look at the strength of the U.S. labor market, with economists expecting the economy to have added 243,000 jobs in April, moderating from 303,000 in March. The unemployment rate is expected to remain steady at 3.8%.

Ahead of Friday, there will be ADP data on private sector hiring as well as the report on JOLTS job openings and other survey data that will help firm up expectations.

Investors will also be looking to Tuesday’s data on the employment cost index for signs that inflation pressures arising from the labor market continue to cool.

3. Tech earnings

The last of the "Magnificent Seven" megacaps that drove markets higher last year to report are Amazon (NASDAQ:AMZN), on Tuesday, and Apple, on Thursday.

Apple shares (NASDAQ:AAPL) have tumbled over 10% so far this year and the iPhone maker is expected to post a decline in first quarter earnings after China smartphone shipments fell 19%.

Amazon's cloud computing business will be in focus while investors will also be watching what the online retailing giant has to say about consumer spending.

Solid reports from Microsoft (NASDAQ:MSFT) and Google parent Alphabet (NASDAQ:GOOGL) on Thursday helped the S&P 500 register its biggest weekly gain since November.

But some of their peers such as Tesla (NASDAQ:TSLA) and Facebook parent Meta Platforms (NASDAQ:META) have given a mixed performance.

"We cautioned that potential earnings beats might not lead to equity upside during the results season, given the already strong equities run leading up to the earnings season, and stretched positioning...," JPMorgan analysts said in a note. "Indeed, stock price reactions in the US (have) been underwhelming so far."

4. China PMI data

Market watchers will be looking to Chinese manufacturing data for April for signs that a long-awaited recovery in the world's second largest economy is gathering momentum after last months stronger than expected data.

Official figures for China's purchasing managers' index are due on Tuesday, followed shortly afterwards by the Caixin/S&P Global manufacturing PMI.

Upbeat data would be a relief to policymakers who have been trying to shore up growth and bolster investor sentiment.

Global investment houses have turned increasingly bullish on Chinese stocks, helping the blue-chip index tack on more than 10% from a February trough. But Beijing has lately found itself in a bind over its currency. The yuan is sliding against a robust dollar but is stronger against its major trading partners - an unwelcome sign for China's export-dependent economy.

5. Eurozone data

The eurozone is to release inflation and economic growth data on Tuesday which will likely strengthen market bets for a June rate cut by the European Central Bank.

Inflation has fallen quickly over the past year and the ECB has indicated it plans to cut rates in June, but the longer-term outlook remains clouded by rising energy costs, stubbornly high services inflation and continued geopolitical tensions that threaten to disrupt trade.

Economists are expecting the bloc’s gross domestic product to have expanded by just 0.2% in the first quarter, on a year-over-year basis.

Progress on inflation is expected to have stalled with consumer prices expected to have risen by 2.4% in April, matching the previous month amid rising energy costs.