It is a relatively quiet week ahead in terms of calendar events for markets. The focus will remain on the pandemic, inflationary pressures and what that might mean for policy direction, particularly monetary stimulus, and on what Fed speakers will have to say about the matter. In terms of data highlights, flash PMIs for May will be reported at the end of the week, as well as the final few earnings releases of the current season.

Starting with the pandemic, there has been some limited good news over the last couple of weeks, since the number of new cases at the global level has continued to fall from its peak in late April. Nevertheless it still remains at very elevated levels, and some countries in Asia are battling with fresh outbreaks, raising concerns over the imposition of fresh restrictions. Indeed, Japan is set to expand their state of emergency, which comes as they prepare to host the Olympics from late July.

The Indian double mutant variant remains a global concern due to its more transmissible property as well the greatly reduced effectiveness of the vaccines which have currently been administered. Indeed, the UK has been highlighting this concern despite the removal of several restrictions following the mass vaccination drive successfully driving down infection figures. Indoor dining and other venues including museums and cinemas will reopen in England, while limits on outdoor gatherings will be raised to 30 people.

Other regions are also moving towards further easing, with New York City’s capacity restrictions ending for stores and restaurants next week. President Biden has also stated publicly that the mask requirement has been removed for fully vaccinated people in contact with each other.

On the data side, the main highlight this week will be the release of the flash PMIs for May, which will give us an initial indication of how the global economy has fared into the month. The April readings were pretty strong on both sides of the Atlantic, with the Euro Area composite PMI at 53.8, the highest since July, while the US composite PMI was the highest on record at 63.5. So all eyes will be on whether this momentum can be sustained through the rest of Q2.

Although it is still early in the recovery cycle in Europe and the US, base rate effects are starting to take hold in China which has been well into its recovery path. Indeed factory output grew 9.8% in April from a year ago, in line with forecasts but slower than the 14.1% surge in March. Retail sales, meanwhile, rose 17.7%, much weaker than a forecast 24.9% uptick and the 34.2% surge in March.

Otherwise, there’ll be some further April data from the US, including on housing starts, building permits and existing home sales, while the weekly initial jobless claims will also be in focus, after they fell to a post-pandemic low last week of 473k.

It’s a fairly quiet week ahead on the central bank front, with the next big round of meetings not taking place until mid-June. However, there’ll be a lot of focus on Federal Reserve speakers in particular as they react to the much stronger-than expected CPI reading for April, which came in at +4.2% year-on-year, the highest since 2008.

The minutes from the FOMC’s last meeting will also be released, so market participants will be paying close attention to see if that reveals anything new about their latest thinking on when tapering might commence, a key catalyst to look out for.

Earnings season will continue to wind down over the week ahead, with more than 90% of the companies in the S&P 500 having now reported. There are still a few companies left however next week, including 20 from the S&P 500 and a further 27 from the STOXX 600. Among the highlights include Ryanair today and Walmart and Home Depot on Tuesday. Wednesday sees releases from Cisco Systems, Target and Porsche. On Thursday, releases include EasyJet and Royal Mail, before Friday sees Deere & Company report.