Geopolitics are expected to continue to dominate headlines next week, while investors will also keep an eye on the minutes of the Federal Reserve’s July monetary policy meeting and results from retailers, including Walmart.
Here’s what to watch in the coming days.
An escalating war of words between Donald Trump and North Korea, which is seeking to develop a nuclear missile that could reach the US, unnerved markets and is likely to keep investors’ attention next week.
The US president said “military solutions” had been put in place and were “locked and loaded” if Pyongyang — which has previously said it is considering launching a missile near the US territory of Guam — were to act unwisely.
Japan’s foreign minister Taro Kono and defense chief Itsunori Onodera are expected to visit Washington on Thursday to meet with Jim Mattis, US defence secretary, and Rex Tillerson, secretary of state, to discuss the growing threat.
Japanese growth is expected to have rebounded in the second quarter on improving domestic consumption, with GDP expanding 0.6 per cent from the first quarter, when it grew 0.3 per cent. That is expected to translate to annualised growth of 2.5 per cent, compared to the 1 per cent growth registered at the start of the year.
The Federal Reserve is slated to release the minutes of its July meeting, at which the central bank opted to leave its target interest rate unchanged and said that it could begin tapering its $4.5tn balance sheet “relatively soon”.
While some took that to mean the Fed could begin to trim its balance sheet as early as September, others argue it gives policymakers more wiggle room to begin tapering anytime in the next 12 months. Investors will parse the minutes for clues on what the Fed meant by “relatively soon”, as well as any updated comment on labour costs and inflation.
Ahead of the release, two Fed officials, Neel Kashkari, head of the Minneapolis Fed and a voting member on the monetary policy-setting Federal Open Market Committee, and St Louis Fed head James Bullard have said the central bank should sit pat on rates as inflation has been sanguine and remains shy of the 2 per cent target.
Data on Tuesday are expected to show that retail sales rose 0.4 per cent in July from the previous month, when they fell 0.2 per cent. So-called control retail sales — which strip out volatile items like food, petrol and building materials — are also expected to have risen 0.4 per cent month-on-month, following a 0.1 per cent drop in June.
“With the savings rate having normalized closer to other fundamentals recently, we anticipate that retail sales growth will become more aligned with wage growth again,” said analysts at RBC Capital Markets.
While retail sales may have rebounded in July, US department stores haven’t been the biggest beneficiaries. Macy’s, Kohl’s and Dillard’s already disappointed investors by noting that sales continued to fall, although less than feared, and gross margins remained pressured in the second quarter. But next week Wall Street is set to hear from the likes of DIY home-improvement chain Home Depot, which has thus far bucked much of the retail pain, and Walmart, the world’s largest retailer. There are 20 other companies listed on the S&P 500 that are slated to report results, including Target, Coach, TJX Cos, Gap and non-retailers like Deere.