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investing newEconomy19 minutes ago (Jan 02, 2022 08:13AM ET)

Top 5 Things to Watch in Markets in The Week Ahead: Jobs, PMIs, OPEC, Earnings

By Daniel Shvartsman – 2022 kicks off with a set of December economic data points that will provide important signposts for both the state of the economy in advance of a year of potential Central Bank policy tightening, and on how big of an impact the Omicron variant of Covid-19 has had on the global economy. While it’s not quite earnings season yet, we also have a few corporate reports to review this week. And an OPEC meeting may be the headline event for the week and the one that has the biggest impact on the year ahead.

Here’s what you need to watch for in the first week of 2022 in financial markets:

1. December Jobs Report

The U.S. Jobs comes out Friday. Expectations are for a growth of 400,000 jobs, vs. 210K last month and an average of 494K jobs added in the last six months. The is expected to edge down to 4.1% from 4.2%.

Unemployment is the flipside of inflation, at least in the Federal Reserve’s estimation and aims, so a strong report would give more room to the Fed to proceed with rate hike and policy tightening plans. At the same time, the last report that came during a big Covid-19 wave – the August and September reports overlapping with the Delta wave – came in light at least in the initial read before the numbers were revised upward. While few new restrictions were put into place in response to the latest wave from the Omicron variant, consumers’ behavior changing and the raw fact of hundreds of thousands of people being sick may weigh on the numbers.

2. OPEC Meeting after a stand-out year for Oil

The Organization of the Petroleum Exporting Countries (OPEC) meets on Tuesday. At their previous meeting, OPEC reaffirmed their decision to increase oil production in 2022 and said that they from Omicron on demand for oil. With a month more data – which includes record cases and a bevy of flight cancellations on the one hand, but a not quite clear consensus that this variant’s effects are milder than previous incarnations of Covid – we’ll see whether OPEC holds the line, as expected, or alters its outlook and production schedule in any way for the year ahead.

Oil finished the year up over 50%, with having since 2009 and its best year since 2016, and the this year is expected to support the price of oil even with OPEC’s production increases.

3. PMI numbers and CPI numbers around the world

PMI (Purchasing Manager Index) reports come out this week across the world, which will be another key gauge on economic activity. Scanning the economic calendar, it appears forecasters expect expanded activity (numbers north of 50) in most places, reflecting perhaps the holiday season and the continued recovery momentum from the pandemic. With supply chain challenges continuing, one would expect manufacturing to ramp up as part of ‘normalization’, but the changes in behavior and winter weather in the Northern hemisphere may slow services growth.

Consumer price index (CPI) and Producer Price Index (PPI) reports also come out from various countries this week. South Korea of reports, with European countries and then the as a whole reporting later this week.

2021 was a year of more money chasing fewer goods and experiences, begetting inflation, so these two sets of reports will give a spot check of how many regions exited 2021 and how that sets them up for the year ahead.

4. Retail, Office, and Industrial earnings this week

While Q4 earnings season tends to be the slowest to kick off as companies close their books for the year, we get a few off-cycle reports this week to work through.

Walgreens Boots Alliance (NASDAQ:) is the headliner, as the U.S.-based pharmacy retailer reports Thursday before market open. It is $32.46B in revenue, a 7% decrease vs. the year ago period (amid a divestiture), as well as $1.35/share in earnings, a 31% jump. This comes amid reports that Bain Capital has made a bid for the U.K.-based Boots chain.

Bed Bath & Beyond (NASDAQ:) also reports Thursday morning. The one-time meme stock and struggling retailer and provided underwhelming guidance, so eyes will be on whether they can show any incremental improvement or positive guidance for the holiday season quarter (this report is for the quarter ending November 27th).

MillerKnoll (NASDAQ:) reports Tuesday after market hours. The office furniture maker – a combination of legacy companies Herman Miller and Knoll – in revenue in its first quarter as a combined entity, and the call and guidance will be a good indicator for whether companies are merely postponing plans to return to the office or abandoning them.

WD-40 Company (NASDAQ:), Constellation Brands (NYSE:), and PriceSmart Inc (NASDAQ:) are among other reporters this week.

See our full earnings calendar for the latest.

Read also:

5. Presidents Biden and Putin to speak again

U.S. President Joe Biden and Russian President Vladimir Putin are scheduled to speak by phone this Thursday as the tension at the Ukraine/Russia border continues. This would mark the second call in three weeks amidst the stationing of 100,000 Russian troops on the Ukrainian border.

Officials from the U.S. and Russia are poised to meet in Geneva next Monday, January 10th, for security pact negotiations that this recent crisis has brought to light.

President Biden is also expected to speak to Ukraine President Volodymyr Zelenskyy today to express his support for Ukraine.

Beyond the risk of geopolitical instability and what that would mean for markets, this situation has been most relevant for investors with respect to European energy prices and the knock-on effects of inflation in the food supply chain and elsewhere. While has backed off its recent peak in Europe after a series of supply adjustments, a calming of tensions would be a good thing for markets and the region more broadly, assuming it is not too dearly bought.

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