Key takeaways:

• Both the RBA and Federal Reserve are set to hike rates this week, but will Australia central bank risk falling behind the curve in fighting inflation?

• Commodities a key theme as China lockdowns tighten, Russia backflips on grain deal, and local gas industry measures touted

The ASX looks set to open sharply higher in a week dominated by interest rate policy, with the S&P 500 posting a second-straight weekly gain for the first time since August.

Economic Calendar and News

Interest rates will take centre stage this week as both the Reserve Bank of Australia and the Federal Reserve hold their latest policy meetings.The RBA is tipped to lift rates by 25 basis points to 2.85%, however, following last week red-hot inflation data, which suggests the central bank own peak inflation forecast could be overrun, the door is open for a reversion back to 50 basis point increases.

Previously, the RBA has said it will respond to incoming data in charting the course for interest rates, which would suggest that the recent inflation figures, far higher than expected, could give it the impetus to change tack.

At the end of the week, the RBA will also publish its quarterly Statement on Monetary Policy, which is likely to set out the difficult economic conditions across the world, and may even lead to revisions in its outlook for Australian inflation and output growth.On the other hand, the Federal Reserve is widely expected to lift the federal funds rate by 75 basis points to 4%. Commentary from Fed Chair Jerome Powell will be watched closely since investors have recently begun to feel more optimistic that the world largest central bank could begin to slow down its rate hike path following this meeting.

Meanwhile, no shortage of economic data will follow throughout the rest of the week.

Locally, look out for readings on retail sales for September, private sector credit, services and manufacturing activity from October, building permits, home loan lending, plus exports and imports.Back to the US, this week other high profile data consists of job openings, mortgage applications, the Balance of Trade, services and manufacturing activity, and the all-important jobs report for October. Up to 200,000 jobs may have been added to the US economy across the course of the month, with the unemployment rate set to remain steady.

Stocks on watch

Tightening lockdowns in China will be watched closely this week, with the nation COVID-zero policy proving a headwind for Aussie exporters of key commodities like iron ore. Last week saw iron ore prices hit their lowest level in more than two years as concerns build surrounding demand for steel. 

However, if global growth continues to slow down, that could in turn affect other resources like copper. That means stocks like Fortescue Metals (ASX: FMG), Rio Tinto (ASX: RIO), BHP (ASX: BHP), OZ Minerals (ASX: OZL), and Sandfire Resources (ASX: SFR) will all be a key barometer for the outlook of the global economy over the coming trading sessions.

Another breaking development threatening the commodity space is news from the weekend that Russia has suspended its implementation of a UN-brokered grain deal. The arrangement had provided scope for up to 9 million tonnes of grain to be exported out of Ukraine over recent months, putting downward pressure on global food prices. 

However, following Russia move, food prices could start to climb higher once again, which would only compound the global inflation challenge. Some of the stocks leveraged to this theme include Graincorp (ASX: GNC), Nufarm (ASX: NUF), Elders (ASX: ELD), Australian Agricultural Company (ASX: AAC), not to mention, the BetaShares Global Agriculture Companies ETF (ASX: FOOD).

Meanwhile, last week disappointing revelation in the federal budget concerning soaring energy prices will remain a talking point. In a move to quash the fallout of what looms as a broken election promise, Treasurer Jim Chalmers is expected to act to mitigate price hikes, with discussion focusing on an assortment of measures. These include a mandatory code of conduct for the gas industry, price caps structured into the code, as well as increasing taxes on suppliers via the petroleum resource rent tax (PRRT). 

On the other side of the equation, suppliers have already warned the government and industry users that further investment is needed in supply, while the proposed measures could have the opposite effect. Stocks to watch this week include Santos (ASX: STO), Origin Energy (ASX: ORG), Woodside (ASX: WDS), Beach Energy (ASX: BPT), and AGL (ASX: AGL). Elsewhere, US mega-tech stocks will remain in focus after a rocky earnings season thus far. A number of major players, including the likes of Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT), and Meta (NASDAQ: META) provided a weak outlook amid the growing challenges facing the global economy. On the other hand, Apple (NASDAQ: AAPL) proved to be the one exception, with its shares soaring 7.6% in the company biggest one-day rally in over two years.

Apple's results were largely attributable to the resilience of its iPhone and Mac computer, which both recorded strong sales figures. On the other hand, Microsoft and Alphabet posted their worst trading sessions of the year following weak cloud and advertising growth respectively, Amazon floundered on the back of a sluggish sales forecast, and Meta delivered its worst-ever weekly performance as losses mount in relation to metaverse expenditure.

And finally, there are still a slew of high profile US stocks set to hand down earnings this week, including pharmaceutical giants Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA), chip stocks Qualcomm (NASDAQ: QCOM) and Advanced Micro Devices (NASDAQ: AMD), as well as the likes of PayPal (NASDAQ: PYPL), Uber (NYSE: UBER), and Airbnb (NASDAQ: ABNB).