There is no looming deadline next week for a deal to end Europe’s long-running debt crisis, but news out of the troubled eurozone will nevertheless continue to dominate the economic landscape.
Investors will most likely be looking for a sign from the European Central Bank that it may shift its position on launching a massive bond-buying effort to pump liquidity into staggering economies in Italy and Spain.
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An agreement for unified fiscal discipline reached Friday was supposed to serve as a catalyst for such a program. But ECB leaders have balked at offering what could be viewed as a reward for promising austerity, which could have the reverse affect of taking away any incentive for actually enacting that austerity.
Investors will also be looking to see if bond yields fall in Italy and Spain, reducing those countries borrowing costs and making it easier for them to refinance and pay down debt.
Finally, ratings firm Standard and Poor’s will be closely watched for signs that in the wake of Friday’s unity pact it might be backing away from a warning issued earlier this week to downgrade the entire eurozone if Europe can’t get its fiscal house in order.
In the U.S., the Federal Reserve will hold its policy meeting Tuesday and members should give some hint as to whether they’re considering more intervention, namely in the form of a mortgage bond buying program to give a jolt to the stumbling housing market.
Meanwhile, economic reports due next week include November retail sales on Tuesday, which will include Thanksgiving weekend figures, often seen as a solid indicator of holiday shoppers’ moods heading into the last two weeks before Christmas. Consumer sentiment numbers have been rising in recent months, which could bode well for retailers and the broader economy.
Key inflation figures are due Thursday with the release of the producer price index and Friday with the consumer price index. Loose monetary policy in the wake of the financial crisis has raised concerns for inflation, but the Fed has made clear that rising prices are not yet a high priority.