Global Markets: 5 big triggers to watch this week

World markets are entering a quieter summer phase, but investors still face several potential market-moving risks. Food inflation, U.S. consumer spending, Japan’s growth outlook, gold and UK inflation will be in focus. (Source: Reuters)

A strong El Niño, higher energy costs, fertiliser shortages and disruptions to grain shipments from Ukraine are raising concerns about a fresh wave of food inflation. Asia and Latin America could feel the impact most sharply. Markets will watch whether these pressures prove temporary or become a longer-term challenge for central banks.

A busy week of retail earnings will provide important clues about the health of the U.S. consumer. Walmart, Home Depot, Target, Lowe’s and Deere are among the companies in focus. Investors will look for signs that higher fuel costs are shifting spending towards essentials, while borrowing costs could continue to weigh on home-improvement demand.

Japan’s latest GDP data will offer a fresh view of how the economy is coping with higher energy costs and geopolitical uncertainty. Growth is expected to have extended its quarterly expansion streak. With inflation pressures building and the yen under pressure, markets are increasingly expecting the Bank of Japan to raise its policy rate by 25 basis points to 1.25%.

Gold has rebounded strongly from its June lows after suffering a sharp correction earlier in the year. Expectations that the Federal Reserve may avoid further rate hikes have helped revive investor interest. Gold ETFs are beginning to attract inflows again, while central-bank demand remains a major source of support, with central banks buying a record 289 metric tonnes in the second quarter, according to the World Gold Council.

UK inflation and unemployment data will be closely watched after stronger-than-expected June GDP. Inflation eased to 2.6% in June, helped by lower energy prices, but renewed energy-price pressures could push the July reading higher. Concerns over food prices are also growing as extreme heat affects agricultural production, keeping the inflation outlook firmly in focus for the Bank of England.

Global investors face a combination of inflation, growth and geopolitical risks. The key question is whether higher energy and food costs remain temporary or become persistent enough to force central banks to rethink their interest-rate plans.