(not) holidays will come for me

LONDON, July 21 (Reuters) – The peak of the summer season is approaching, but traders in the financial markets have no respite.

Meetings of the US Federal Reserve, European Central Bank and Bank of Japan, preliminary business data for July, company reports and elections in Spain – the calendar is full of events.

Below is an overview of the events of the coming week that focus on the markets.

1/ THE WAIT IS OVER

And now the next meeting of the Federal Reserve System is just around the corner. Inflation in the US is falling, but markets expect another rate hike on July 26.

The more interesting question is whether Fed Chairman Jerome Powell will signal that the Fed is more confident of lowering inflation while maintaining sustainable growth. Such a signal would mean that the most aggressive rate hike cycle in decades is coming to an end.

Signs that the Fed is unlikely to raise interest rates further should in theory support a rally on Wall Street, while the dollar’s decline is likely to continue.

Also in the spotlight are reports from some of the big tech companies that have driven the markets up this year. Among them are Microsoft and Alphabet, which will submit a report on July 25.

2/ SUMMER MEETING

Before going on vacation, ECB representatives will have to carry out the long-announced interest rate hike. This will happen on Thursday: the deposit rate is likely to increase by a quarter of a point to 3.75%.

Investors will no doubt be demanding clarification from ECB President Christine Lagarde on what will happen next in September. Economists are divided on whether there will be another hike or a pause.

ECB hawk Klaas Knot said any move after July was “not guaranteed at all”.

Core inflation, highlighted by the ECB, remains high, but economic growth is weakening. The previously resilient service sector barely recovered in June.

With the release of the July PMI on economic activity and the ECB bank lending review, the summer must-read list for traders will be extended even further.

3/ DIFFICULTIES IN TRANSLATION

The Bank of Japan tries to keep in touch with the markets, but there may be some difficulties in communicating and correctly conveying the meaning of its messages.

The officials’ comments caught investors off guard ahead of the long-awaited two-day central bank meeting, which begins on Thursday.

According to some market watchers, remarks by Bank of Japan Governor Kazuo Ueda regarding a “constant move” in stimulus, including government bond yield curve controls, contradict recent comments by central bank official Shinichi Uchida.

The hawks took Uchida’s remark that he “strongly recognizes” the negative impact of curve control as an indication of an impending rise in the government debt yield cap, which currently caps the 10-year bond yield at 0.5%.

Ueda then reiterated his support for further monetary easing as it stands, with data released on Friday suggesting that inflation in Japan may have peaked.

Core returns ranged from 0.4% over the past two weeks to a four-month high of 0.485% as the market split sharply into two camps. This creates high chances of another surprise from the Bank of Japan.

4/ STOP! ONE-TWO – REPORT!

European companies have started to publish quarterly results. The current reporting season will be decisive for the STOXX 600 stock market index, which increased by around 8% compared to the previous year.

The stock rally stalled ahead of the July reporting season, which Barclays analysts described as “make or break”.

Second-quarter corporate profits are expected to fall 9.2% from the same period a year earlier, with total profits likely to be impacted by weak performance from energy companies, according to I/B/E/S Refinitiv forecasts.

European stocks rose early in the year as investors, largely unfavorable towards Europe, repositioned themselves when the pace of the global economy fell short of expectations.

It was more of a macro story than a report, leaving European equities vulnerable to attacks from companies that missed their earnings targets.

On the other hand, better than expected results could be an impulse for a new rally.

5/ VOTING IN SPAIN

Polls show the conservative People’s Party will defeat the ruling Spanish Socialist Workers’ Party, but forming a government will likely require the support of the far-right Vox party.

The key to markets is how quickly the winner can form a government – the stereotype that stock markets hate uncertainty is not futile.

It also focused on whether Spain’s financial situation would worsen under pressure from major parties to cut taxes or increase spending.

Investors also do not forget about the high level of debt exceeding 100% of GDP, the slowing economy and the tightened EU fiscal rules that will come into force in 2024.

Stock exchange participants are also watching the energy sector, where the two leading parties have different priorities, and the financial sector, as the prospects of introducing a temporary banking tax in Spain are doubtful.

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(Ira Iosebashvili in New York, Kevin Buckland in Tokyo, Naomi Rovnik, Alun John and Dhara Ranasinghe in London)