Investing.com - After one of the most brutal weeks for the market this year, there’s a lot to keep investors on edge in the week ahead.
Trade-related headlines are likely to be main driver of sentiment, as investors continue to watch developments in the ongoing trade spat between the U.S. and China.
Washington and Beijing have been engaged in a trade dispute for the most part of the year, with both countries slapping tariffs on several of each other's products. The standoff has raised concern in the market about a potential slowdown in global economic growth.
Global financial markets will also pay close attention to U.S. consumer price inflation and retail sales data for additional insight into the outlook for monetary policy in the months ahead.
The Federal Reserve is widely expected to announce its fourth rate hike of 2018 later this month, but investors are beginning to question how many increases it can implement next year.
Along with trade and the Fed, investors will have their eyes on the bond market, where an inversion at the short end of the U.S. yield curve raised the specter of a possible recession.
Elsewhere, in Europe, markets are keeping an eye on the European Central Bank's monetary policy meeting for further guidance on when the central bank plans to start raising interest rates.
There is also a key Brexit vote to keep an eye on.
Ahead of the coming week, Investing.com has compiled a list of the five biggest events on the economic calendar that are most likely to affect the markets.
1. U.S.-China Trade Developments
Markets will be keeping abreast of the ongoing trade spat between the U.S. and China amid growing doubts over whether the world's two largest economies will be able to resolve their differences.
Concerns over U.S.-China trade relations were fanned by White House trade adviser Peter Navarro's comments on Friday that U.S. officials would raise tariff rates if the two countries could not come to an agreement during a 90-day negotiating period, ending around March 1.
News of the arrest of a senior executive of Chinese telecom equipment maker Huawei Technologies was another negative headline that threatened to chill talks on some form of trade truce between the two countries.
U.S. President Donald Trump and Chinese President Xi Jinping agreed last week to hold off on additional tariffs on each other's goods for 90 days in order to allow for negotiations to continue.
The U.S. has slapped tariffs on more than half of over $500 billion in Chinese imports, for which China has retaliated, after several rounds of talks failed to resolve U.S. complaints over Chinese industrial policies and lack of access to Chinese markets.
2. U.S. Inflation
The Commerce Department will publish November CPI figures at 8:30AM ET (13:30 GMT) Wednesday, which should give clearer signs on the pace of inflation.
Consumer prices are expected to have risen 0.1% last month, according to estimates, cooling from October's 0.3% gain. On a yearly base, CPI is projected to climb 2.2%, down from 2.5% a month earlier.
Excluding the cost of food and fuel, core inflation prices are forecast to have gained 0.2% last month and 2.2% over the prior year.
Weakening inflation will likely add to expectations that the Federal Reserve will need to slow its pace of rate hikes next year.
3. U.S. Retail Sales
The Commerce Department will release data on retail sales for November at 8:30AM ET (13:30 GMT) on Friday, which investors will be eyeing for further signs on the strength of the American consumer.
The consensus forecast is that the report will show retail sales rose 0.1% last month, after a 0.8% increase in October. Excluding the automobile sector, sales are expected to increase 0.2%.
Rising retail sales over time correlate with stronger economic growth, while weaker sales signal a declining economy. Consumer spending accounts for as much as 70% of U.S. economic growth.
Also on the economic calendar this week will be producer price inflation figures, flash manufacturing and services PMI readings, as well as the latest JOLTS report.
A fourth rate hike for this year is expected later in December, but the road from there is unclear. While Fed policymakers have pointed to three increases in 2019, the market is only anticipating one.
4. European Central Bank Policy Meeting
This week marks the end of an era for the European Central Bank, which is set to formally announce the end of its three-year long, €2.6 trillion easing program, a key move in dismantling crisis-era stimulus.
An announcement is due at 7:45AM ET (12:45 GMT) on Thursday, with a press conference by President Mario Draghi scheduled for 45 minutes after the policy decision.
The ECB will release updated growth forecasts and investors expect it to again lower its GDP projection after an exceptionally weak third quarter, as the region's economy struggles to cope with global trade conflicts, Italian politics and messy Brexit negotiations.
Facing the slowdown and persistent funding strains in some southern member states, banks have called on the ECB to extend its long-term loans (TLTROs).
The ECB has previously pledged to keep interest rates at current levels well into 2019. However, slowing growth, weak business sentiment, and rising political instability have seen markets dial back bets on a December 2019 rate hike.
Money market pricing suggests investors expect roughly a 75% chance of an ECB rate hike next year, down from 100% just a few weeks ago.
This week's calendar also features flash December PMI surveys on manufacturing and service sector activity.
5. Brexit Vote
Staying in Europe, investors will keep a watchful eye on the British parliament's vote on Prime Minister Theresa May's deal for leaving the European Union, which is expected to go ahead on Tuesday.
With her own future in the balance, May has repeatedly insisted that her deal, which envisages continued close ties with the EU, is the only one on the table and that the alternatives are a painful 'no-deal' exit from the EU or possibly no Brexit at all.
It is widely expected that the vote will not pass and ministers are concerned that the scale of defeat would be such it could bring down May's government.
Besides Brexit, market players will focus on monthly GDP figures as well as the latest employment report for further hints on the health of the economy.
-- Reuters contributed to this report