Here's a look at the week ahead in markets from Kevin Buckland in Tokyo, Lewis Krauskopf in New York and Amanda Cooper, Naomi Rovnick and Karin Strohecker in London.
1/ HOGGING THE G7 SPOTLIGHT U.S. Treasury Secretary Janet Yellen told Reuters on Saturday she was "hopeful" there would be a solution to the impasse over the government's debt ceiling. But as world leaders prepare to meet at a G7 summit in Japan for discussions on everything from the climate to the war in Ukraine, many may be distracted by the question of how a potentially disastrous U.S. default can be averted. With bipartisan divides running deep, President Joe Biden has hinted he may not even make it to Hiroshima at the weekend. That would complicate a reported side summit with Japan and South Korea on strengthening security cooperation. Host nation Japan has more at stake than many in this standoff: It is the largest foreign holder of U.S. debt. 2/ ERDOGAN AND THE ECONOMY In a surprisingly strong showing, President Tayyip Erdogan led comfortably in the first round of Turkey's election with his rival now facing an uphill struggle to prevent him extending his rule into a third decade in a runoff vote on May 28. The presidential vote will decide not only who leads Turkey and shapes the foreign policy of the NATO-member country of 85 million people, but also how it is governed and its economic future amid a deep cost-of-living crisis. Turkish bonds, stocks and the lira weakened on Monday as Erdogan's momentum doused hopes that the country could pivot in the near future to a more orthodox monetary and economic policy. With Turks facing a sharp decline in living standards and an economy that is battered by crippling inflation and a collapsing lira, the challenges for whoever ends up at the helm of Turkey will be enormous.
3/ GOING AGAINST THE GRAIN Russia and Ukraine have until May 18 to extend the Black Sea grain deal, which last year allowed the safe passage of Ukrainian exports to help tackle a global food crisis. The two sides could extend the agreement, but Russia says it will walk unless its demands to remove obstacles to its own exports are met. The two are among the world's biggest exporters and supply some of the poorest countries. Ukraine said on Monday no more talks had been scheduled this week. Since Russia invaded Ukraine, wheat futures have dropped by more than 50% from record highs. World food prices have cooled off and the upcoming global harvest is projected to be healthy. That suggests an interruption might not have the same impact as the initial blockade. But the price of staples such as bread remain sky-high. Bread in the European Union cost almost 20% more in March than a year ago. It's far worse in the developing world, where a larger share of household incomes are spent on food.
4/ DATA DIVE A batch of key economic data will shed fresh light on whether the United States is staving off a downturn given Federal Reserve rate hikes. Tuesday's retail sales data will gauge the health of consumer spending, which accounts for more than two-thirds of economic activity. Retail sales fell more than expected in March, as consumers cut back on buying motor vehicles and other big-ticket items. Reports are also due on industrial production and housing starts, while the Philadelphia Fed manufacturing survey could also influence asset prices next week.
Data on Wednesday showed annual U.S. consumer inflation slowed to below 5% in April for the first time in two years. Still, inflation remained well above the Fed's 2% target.
5/ HOW RESILIENT? The week ahead brings current and historic assessments of euro area economic growth, with Q1 GDP data and the influential ZEW Institute surveys of business conditions and sentiment in European power house economy Germany.
Economists polled by Reuters expect to see the "flash" estimate will show the euro area eked out growth of just 0.1% in the three months to March. Some economists say stagnation has continued and could result in a recession later this year.
Euro area monetary indicators, such as credit demand, point to steep declines in consumption and investment. Household savings rates are rising as borrowing falls.
None of this is guaranteed to dissuade the European Central
Bank from continuing to raise rates, as core inflation, at 5.6%
in April, remains too far above its 2% target to overlook.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
U.S. debt problem at G7 US retail sales expected to bounce back in April The lira's long decline Global food prices have cooled off Euro area to barely grow in Q1 2023 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Compiled by Amanda Cooper; Editing by Dhara Ranasinghe and
Andrew Heavens)
