Daily Market Diary-Five market developments to keep an eye on this week.

As the fallout from the forced UBS-Credit Suisse merger continues to be evaluated, investors will be looking for signs of stability in the markets roiled by bank failures in the coming week. The likelihood of a recession due to market turmoil may be revealed in forthcoming data from the United States. The PMI data from China and inflation data from the Eurozone will also be scrutinized.

Financial market unrest

After the failure of two U.S. banks earlier this month and the forced takeover of troubled Credit Suisse by rival UBS and the writedown of some of its contingent convertible bonds last weekend, investors are bracing for more turmoil in the banking sector.

Many people are concerned that the Federal Reserve's aggressive rate hikes over the past year will have unintended consequences for the economy.

“The market is very nervous at this point and investors are acting first and looking into the nuances later,” Wei Li, global chief investment strategist at fund giant BlackRock, told Reuters. Since it's not entirely obvious that the situation is under control, your concern is understandable.

Traders have been fixated on the Deutsche Bank of Germany as of late. (ETR:DBKGn). More than a quarter of the value of the company's shares have been wiped out this month, including Friday's 8.5% drop, and the cost of default insurance on its bonds has skyrocketed, even though few put it in the same league as Credit Suisse.

Rough beginning to the year

Investors are wondering what the second quarter will bring after a turbulent first.

The number of investors piling into stocks in January was the highest for any January in history. There was less worry about inflation, and the economy looked healthy.

Now, at the end of Q1, the market has been whipped into a frenzy reminiscent of 2008 due to the failure of numerous cryptocurrency companies, the stock price declines of U.S. regional banks following the failure of Silicon Valley Bank, and the implosion of Credit Suisse.

Fed Chair Jerome Powell warned that strains on the banking system could lead to a credit crunch, which would have “significant” effects on the faltering U.S. economy.

Financial markets are increasingly betting against a rate hike at the conclusion of the Federal Reserve's next policy meeting in May, despite the fact that Fed officials still see further rate hikes as a strong possibility.

Data from the United States

The Federal Reserve's preferred inflation gauge, the core PCE price index, will be released this Friday as the week's only major economic event. It picked up speed in January, heightening fears of a more hawkish Federal Reserve.

March's consumer confidence numbers are scheduled to be released on Tuesday, and they're expected to reflect the effects of financial system stresses.

Pending home sales, revised GDP, and initial jobless claims data are also reported.

Fed Governor Philip Jefferson, Boston Fed President Susan Collins, Richmond Fed President Tom Barkin, and Fed Governors Christopher Waller and Lisa Cook are just some of the Fed officials scheduled to speak this week.

Inflation in the Eurozone

On Friday, the Eurozone will reveal highly anticipated inflation data. While headline inflation is anticipated to decrease, the underlying rate of inflation, which excludes volatile elements like food and fuel prices, is anticipated to increase.

Even though the economy is beginning to show signs of improvement after the European Central Bank raised interest rates by 50 basis points earlier this month, some policymakers are calling for more cautious steps.

Meanwhile, concerns that the banking crisis will cause a slowdown in lending have weighed on the economy.

Investors will be listening to speeches by Bundesbank chief Joachim Nagel on Monday and European Central Bank president Christine Lagarde in Frankfurt on Tuesday for clues about how policymakers see the inflation threat in the midst of ongoing turmoil in the banking sector.

Inflation in Tokyo and the China PMI

Market watchers are looking to Friday's Chinese PMI data to determine how robust the recovery in the world's second-largest economy has been since pandemic restrictions were lifted.

In Japan, all eyes will be on Friday's Tokyo inflation data, which is widely anticipated to show that inflation has exceeded the Bank of Japan's 2% target for the tenth consecutive month.

After a decade of unprecedented stimulus under his predecessor, incoming BOJ Governor Kazuo Ueda is expected to oversee the unwinding of yield curve controls and negative interest rates.