Inflation data from the U.S. and the eurozone will help shape expectations for interest rates while central bankers gather in Portugal for the European Central Bank’s annual forum. Economic data out of China will also be in the spotlight as the recovery in the world’s number two economy falters, and events in Russia will also be closely watched after an attempted insurrection challenged President Vladimir Putin's grip on power.

  1. U.S. data

  Investors will get a fresh update on the possible future path of interest rates on Friday with the release of May data on the personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge.

In the 12 months through April, the PCE price index as well as the core rate were still running well above the Fed’s 2% target.

The inflation numbers will feed into investor expectations around the central bank's next rate decision in July, after it paused rate hikes at its June meeting but signaled that more hikes lie ahead.

Prior to that, the latest consumer confidence report is due out Tuesday, after the index hit a six-month low in May. June's index is expected to tick higher.

 The Case-Shiller index  national home price index is also due for release on Tuesday. The index climbed 0.4% in March after adjusting for seasonal fluctuations.

2. First half drawing to a close

 The second quarter of what has been a turbulent year so far for markets is ending. The year started with a burst of optimism over China's post-COVID recovery, greater resilience in the global economy; and relief that inflation could have peaked.

Since then, a U.S. banking crisis, the collapse of Credit Suisse, and the struggle to rein in inflation has made the last six months feel like a long time in markets.

The hype around artificial intelligence (AI) has made Big Tech the best-performing asset of 2023, with a gain of 75%. But it's been a difficult year for the rest of the market, other than in specific pockets such as Japanese equities and European luxury stocks.

Surprisingly, considering the turmoil in the sector, the only asset to even come close to Big Tech's returns is Bitcoin, which saw a gain of 73% compared with a 20% loss in H2 2022.

  3. Eurozone inflation 

The eurozone is to release preliminary inflation data for June on Friday. And while the headline rate of inflation is expected to moderate, underlying inflation is expected to tick higher, underlining the challenge facing the ECB.

ECB President Christine Lagarde struck a more hawkish tone than expected following the bank's most recent policy meeting, reiterating that rates would need to be increased again in order to bring inflation down to the ECB's 2% target and that they "will be kept at those levels for as long as necessary."

Traders are now betting on a July hike by the ECB, and expect another move by October that would bring rates to 4%.

Investors will get a chance to hear from Laggard, along with Fed Chair Jerome Powell and other global central bank heads, at a panel discussion at the ECB’s annual forum in Sinatra, Portugal on Wednesday. Inflation is likely to be front and center during that exchange.

4. China PM Is

China is to release purchasing manager indexes for June on Friday, with the data expected to add to the narrative that the recovery in the world’s second-largest economy is losing momentum.

China cut its key lending benchmarks last week as authorities attempted to shore up growth, but concerns about the property market meant the easing was not as large as expected.

Bad news could be taken as a positive, if traders see it as a way of pushing authorities to offer more support to the economy - as long as it eventually arrives.

But if hopes are running high, patience is wearing thin: Several global investment banks cut their 2023 gross domestic product growth forecasts for China after May economic data missed forecasts.

  5. Russia turmoil 

Investors will be keeping an eye on developments in Russia amid concerns over the potential impact on safe-haven assets such as U.S. Treasuries, and on commodities prices, after an attempted insurrection on Saturday.

Russian mercenaries led by Yevgeny Prigozhin, a former ally of Putin and founder of the Wagner army, advanced most of the way to Moscow after capturing the city of Rostov before they abruptly halted their approach.

"It certainly remains to be seen what happens in the next day or two, but if there remains uncertainty about leadership in Russia, investors may flock to safe havens," Kennedy Goldberg, head of U.S. rates strategy at TD Securities in New York, told Reuters.

Goldberg said that despite the deescalation, "investors may remain nervous about subsequent instability, and could remain cautious."

Other analysts saw little reaction as the situation seemed defused. Rich Steinberg, chief market strategist at the Colony Group in Boca Raton, Florida, told Reuters that "markets will kind of treat this as another geopolitical risk" and "some frayed nerves were calmed in the short run" by the deescalation.