Reporting season is heating up and the 4 largest US companies by cost are among those reporting their results this week. The U.S. will release third quarter GDP data, which is expected to show a return to growth after a technical downturn in the first half of the year. The European Central Bank is expected to deliver another sharp 75 basis point rate hike on Thursday as eurozone inflation approaches 10%. Political developments in the UK remain in focus as the Conservative Party will choose a new prime minister. Meanwhile, investors will be watching for delayed economic data from China after the country’s leader Xi Jinping secured a historic third term on Sunday. Here’s what to know at the start of the week.

1. Earnings of the largest capitalization companies

The 4 largest U.S. companies by market capitalization are due to report this week. Investors want to see how corporate leaders are faring amid rising inflation and the Federal Reserve’s abrupt rate hike, which has raised fears about the prospect of a recession.

Microsoft and Alphabet are due to report on Tuesday, while Amazon and Apple are due on Thursday.

“Because of their heavy weighting, if these companies don’t report, it will put pressure on the indexes, which will continue to decline,” Chuck Carlson, chief executive of Horizon Investment Services, told Reuters.

So far, the third-quarter reporting season has been better than expected after results from companies such as Goldman Sachs, Bank of America, Netflix and Johnson & Johnson boosted sentiment.

2. US GDP

On Thursday, the US will release its first GDP release for the third quarter. The economy is expected to grow at an annualized rate of 2.1% after 2 quarters of contraction in the first half of the year.

The economic calendar also includes data on the Fed’s preferred measure of inflation, the core personal consumer spending index, as well as personal income and spending data. Investors will also get data on durable goods orders, initial jobless claims, consumer confidence and housing market reports in the form of new housing and pending home sales data.

Fed officials will take a traditional pause before their upcoming Nov. 1-2 meeting, at which they will almost certainly raise interest rates by 75 basis points for the fourth consecutive time.


3. ECB rate hike

Thursday’s second 75 basis point rate hike by the ECB appears to be a done deal, despite the looming prospect of a recession in the eurozone, as the conflict in Ukraine is fueling an energy crisis that is driving inflation higher and growth lower.

With eurozone inflation at nearly 10%, well above the ECB’s 2% target, there is little appetite for lower growth now, even as the risk of recession rises.

Ahead of Thursday’s monetary policy meeting, PMI data for October on Monday will show whether the eurozone slipped into contractionary territory at the end of the third quarter.

Meanwhile, revised third-quarter GDP data on Friday is expected to show evidence of slowing growth in France and contraction in Germany.

4. Political turmoil in the UK

This week, the UK Conservative Party, which has a large majority in Parliament and does not have to call an election for another 2 years, is expected to choose a new leader to become Prime Minister – already its first in 6 years.

Former Chancellor Rishi Sunak, as well as Penny Mordaunt and previous Prime Minister Boris Johnson are potential successors to Liz Truss, who resigned on Thursday after just 6 weeks in office.

Truss was forced to leave because of economic plans that included billions of pounds of unfunded tax cuts, which caused the pound and bond market to plummet, forcing the Bank of England to intervene.

The next Prime Minister will inherit an economy on a recessionary path, with rising interest rates and inflation of over 10%, leaving millions facing a cost of living crisis.

Treasury Secretary Jeremy Hunt, who is expected to remain in office under the new prime minister, said on Friday that he will do what is necessary to reduce the national debt ahead of the new budget to be announced on October 31.

5. China

Investors will await the release of delayed economic data from China, including third-quarter GDP data as well as trade, retail sales, industrial production and housing market reports for September.

Tight restrictions due to COVID-19 along with supply chain disruptions caused by the conflict in Ukraine and slowing global growth due to soaring borrowing costs to curb inflation have put pressure on the world’s second-largest economy.

On Sunday, China’s leader Xi Jinping secured an unprecedented third term in power for himself and installed loyalists in the top governing body. Analysts are closely watching what the economic policy implications could be.