The US reporting season is set to kick off amid concerns that the Federal Reserve’s determined rate hike campaign could lead the economy into recession. Investors will get an update on the state of the U.S. housing market, where rising borrowing costs have already cooled demand. Speeches by several Fed officials are also on the agenda. In the UK, Jeremy Hunt will begin his first full week as chancellor after Prime Minister Liz Truss was forced to sack her predecessor. Elsewhere, third-quarter economic data from China is likely to highlight the challenges facing the world’s No. 2 economy, while in Japan the yen will once again be in the crosshairs of intervention. Here’s what you need to know at the start of the week.

1- Earnings Reporting

The third-quarter earnings reporting season begins as companies report their results amid a challenging environment caused by a stronger dollar and continued high inflation.

According to Reuters, earnings for S&P 500 companies as a whole are expected to have risen 4.1% from a year earlier, which would be the slowest growth since the fourth quarter of 2020.

However, more attention may be focused on how CEOs are forecasting the future; the consensus forecast of analysts is for corporate earnings to grow nearly 8% next year, according to Refinitiv IBES, but many investors doubt that prediction as recession risks loom.

The market downturn has dragged down share prices, but a worsening earnings outlook could reduce the appeal of stocks. Companies such as Tesla (NASDAQ:TSLA), Netflix (NASDAQ:NFLX) and Johnson & Johnson (NYSE:JNJ) are expected to report their earnings in the coming week.

2. U.S. housing data

After last week’s better-than-expected US inflation data, all eyes will be on the housing market with reports on building permits, housing starts, and existing home sales due out.

Home prices fell in July for the first time in more than a decade as interest rate hikes hit demand for homes, while mortgage applications also fell.

The economic calendar also includes reports on industrial production, the Philadelphia Fed’s manufacturing index, the Empire State’s manufacturing index and initial jobless claims.

Regional FRB heads Neel Kashkari, Charles Evans and James Bullard are also scheduled to make statements that will be closely watched.

On Saturday, Bullard said last week’s CPI data showed that inflation has become “ruinous” and left open the possibility of a 75 basis point rate hike at the Fed’s upcoming November and December meetings, but added that it was too early to draw such conclusions.

3. U.K. tries to regain calm

Trading in “shabby” British government bonds will resume on Monday without the support of the Bank of England’s emergency bond buying program, which ended on Friday.

Britain’s new finance minister Jeremy Hunt has said he will rebuild the country’s public finances after the initial economic plan proposed by Liz Truss and former minister Kwasi Kwarteng confounded the financial market.

Reports that the government is preparing for a major U-turn on planned tax cuts have helped ease fears about the state of the public finances, but it will need to be translated into concrete plans to avoid a renewed sell-off in bonds.

Investors will also keep an eye on Wednesday’s release of UK inflation data for September, which is expected to post double-digit figures on the back of lower living costs, while retail sales data on Friday is expected to point to a decline in consumer spending.


4. Data from China

China will release third quarter GDP data on Tuesday, and while growth is expected to rebound from the previous quarter, the economy is still on track for its slowest annual growth rate in nearly 50 years.

The annual growth rate is expected to increase to 3.4% in the 3 months through September from 0.4% in the second quarter.

Tight COVID-19 restrictions 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.

Analysts expect China’s economy to grow at 3.2% in 2022, well below the official target of 5.5%.

Investors will be watching China’s week-long Communist Party Congress, which began on Sunday, for any guidance on economic policy.

5. Yen intervention?

Currency traders will keep a close eye on the yen amid speculation that the Bank of Japan may take new steps to strengthen its currency after it intervened in the market last month for the first time since 1998.

Bank of Japan Deputy Governor Masazumi Wakatabe said Saturday that the yen’s recent fluctuations have been “clearly too fast and one-sided,” indicating concerns about the possible economic impact of the yen’s fall against the dollar to a 32-year low.

Japan intervened in the foreign exchange market in September to halt the yen’s steep fall, which was mainly due to a divergence in monetary policy between the U.S. Federal Reserve’s sharp rate hike and the Bank of Japan’s ultra-soft monetary policy of targeting a 2% inflation rate.

The BOJ is an exception among the world’s central banks, many of which are raising interest rates to combat red-hot inflation as they focus on supporting a fragile economic recovery.