Food Inflation Fears Spark Global Market Jitters as US Consumer Spending Comes Under Scrutiny

Global markets are bracing for a busy week ahead as investors navigate several potential market-moving risks. Despite entering a quieter summer phase, major economies and financial indicators will be under scrutiny.

Fears of food inflation have returned, driven by factors such as El Niño, higher energy costs, fertiliser shortages, and disruptions to grain shipments from Ukraine. This could impact Asia and Latin America the most severely, forcing markets to watch whether these pressures prove temporary or become a longer-term challenge for central banks.

A slew of retail earnings will provide crucial insights into the health of the US consumer. Companies like Walmart, Home Depot, Target, Lowe’s, and Deere will be under close observation as investors seek 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 is expected to show growth extending its quarterly expansion streak. With inflation pressures building and the yen under pressure, markets anticipate a 25-basis-point interest rate hike by the Bank of Japan to 1.25%.