Key takeaways:

• Monetary policy is likely to drive the narrative for financial markets this week

Amid a shortened trading week in the US, the local share market will look to take clues from central bank commentary.

Economic Calendar and News

A fairly subdued week of economic news and developments awaits traders, but one of the more noteworthy events this week will be Federal Reserve Chair Jerome Powell testimony before Congress, which forms part of his semi-annual testimony on monetary policy.Last week the Federal Reserve made the widely anticipated move to keep interest rates on hold, which followed ten consecutive rate hikes intended to tame inflation. Nonetheless, the Fed dot plot' indicated there may still be at least a couple more rate hikes on the cards.Meanwhile, the National Association of Home Builders (NAHB) will release its Housing Market Index for June, which provides a barometer for confidence in the construction industry. Economists anticipate the reading may retreat from an uptick in May, although broadly speaking, momentum has picked up this year despite higher interest rates.Also in focus are housing starts and building permits for May, with the US Census Bureau responsible for publishing data on these metrics.For domestic observers, keep an eye out for the minutes from the Reserve Bank of Australia most recent monetary policy meeting. Investors will be scrutinising the commentary for details on what may have prompted the nation central bank to hike interest rates yet again, despite widespread belief at the start of the month that a pause was looming.RBA Deputy Governor Michele Bullock is also set to deliver a speech to the Australian Industry Group, which could offer further insight on the key drivers influencing the bank decision making, and views for the economic outlook.

Last week unemployment data has increased the likelihood of another rate hike in a fortnight time. The unemployment rate fell from 3.7% in April to 3.6% in May, with 75,900 new jobs added to the economy, signalling residual strength in the labour market.

Separately, the Bank of England is expected to hike interest rates later this week by 25 basis points to 4.75%. 

Stocks on watch

Setting a fresh all-time high last week, tech giant Microsoft (NASDAQ: MSFT) was buoyed by upbeat commentary around its artificial intelligence (AI) prospects. One executive from the company indicated that Microsoft could generate US$10 billion or more in AI revenue from developers utilising its Azure cloud or OpenAI models. 

The company has an exclusive licence on OpenAI models, including the increasingly popular ChatGPT language model. Furthermore, Microsoft OpenAI tools are also incorporated in its Bing search engine and Windows operating system. On the back of the update, JPMorgan lifted its price target for MSFT from US$315 per share to US$350 per share, which the stock briefly surpassed on Friday.

Another development out of the US saw the Food and Drug Administration (FDA) advise vaccine manufacturers to develop monovalent shots aimed at the XBB.1.5 variant. That means updated vaccines intended to protect against just one strain of COVID, as opposed to current bivalent vaccines. With a new pipeline of vaccines being requested by US authorities, that could shift some investor attention back to vaccine manufacturers like Pfizer (NYSE: PFE), Moderna (NASDAQ: MRNA), and Novavax (NASDAQ: NVAX).Retailer Premier Investments (ASX: PMV) will trade ex-dividend on Tuesday, which follows a two-month period where the stock has shed about 18% of its value in response to concerns about retail spending amid the weak macro environment.

When the company reported its half-year earnings back in March, it declared an interim dividend of 70 cents per share, including a special dividend of 16 cents. Since then, however, a number of the company peers have indicated subdued or difficult trading conditions, with consumers seemingly responding to rising interest rates by tightening their spending.

Lithium producer Allkem (ASX: AKE) might be another name on watch after the company got a boost from investment bank Goldman Sachs. The broker coverage sees the stock retain its buy' rating, but analysts have slapped the lithium giant with an upgraded price target of $17.20 per share. That rating is underpinned by the company vertical integration and low-cost production status. Just a month ago Allkem struck a merger deal with US-listed peer Livent, with the proposed transaction set to unfold by the end of the year.Sports betting company Pointsbet (ASX: PBH) could be a talking point over the coming days following an indicative bid for its US business by DraftKings. The company, which is currently recommending an earlier US$150 million offer from Fanatics, has afforded its new suitor nine days to formalise its US$195 million bid. It sets the stage for a potential bidding war between the two parties, but Pointsbet is not expected to waver for the time being given the non-binding nature of the new offer.SelfWealth Ltd ABN 52 154 324 428 (Selfwealth) (AFSL 421789). The information contained on this website is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser and/or accountant. Taxation, legal and other matters referred to on this website are of a general nature only and should not be relied upon in place of appropriate professional advice.