Summer Risks Loom Large as Food Inflation, Rate Hikes Dominate Market Watch

Global markets are entering a relatively quiet summer phase, but investors still face several potential market-moving risks. One of the biggest concerns is food inflation, which is being driven by factors such as higher energy costs, fertiliser shortages, and disruptions to grain shipments from Ukraine.

These pressures could have a particularly sharp impact on Asia and Latin America, where consumers are already facing higher prices for staples like rice and wheat. Markets will be watching closely to see whether these pressures prove temporary or become a longer-term challenge for central banks.

In the US, retailers such as Walmart, Home Depot, Target, Lowe’s, and Deere will report their earnings this week, providing important clues about the health of the US consumer. 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.

Meanwhile, 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, but inflation pressures are building and the yen is under pressure, which could lead to another rate hike by the Bank of Japan.

Gold has also 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, with gold ETFs attracting inflows again and central banks buying a record 289 metric tonnes in the second quarter.