World Week Ahead: Fed meeting, US jobs loom

Monday 30th January 2017

As US President Donald Trump moves ahead with protectionist policies as well as a visa ban that impacts some of the country’s largest tech companies including Google, investors will eye a Federal Reserve policy meeting and the latest jobs data.

Google chief executive Sundar Pichai recalled staff travelling overseas who may be affected by Trump's executive order, signed on Friday, prohibiting entry by people from seven majority-Muslim nations for 90 days, according to Bloomberg. Pichai slammed Trump’s move.

"It’s painful to see the personal cost of this executive order on our colleagues," Pichai wrote in a note to employees Friday, saying more than 100 company staff are affected by the order, Bloomberg reported. "We’ve always made our view on immigration issues known publicly and will continue to do so."

Green card and visa holders were being blocked from boarding US-bound flights within hours of Trump's ban, according to news reports.

Last week Trump also incensed Mexican President Enrique Pena Nieto, prompting the latter to cancel a meeting as his US counterpart threatened to impose a 20 percent tax on Mexican imports to help pay for a border wall between the two countries.

"Mexico may run a large trade surplus with the US, but the idea that it has 'taken advantage' of its large neighbour—as Donald Trump provocatively tweeted on Friday—is surely wide of the mark," Capital Economics wrote in a note. “Arguably, the opposite is true, which is why his policies pose a serious threat to the earnings of the companies that dominate the S&P 500.”

Meanwhile, a Commerce Department report last Friday showed that US gross domestic product rose at a slower-than-expected 1.9 percent annual pace in the fourth-quarter, easing from a 3.5 percent rate in the third quarter.

The Federal Reserve begins its two-day meeting on Tuesday. While no change in interest rates is expected this time, investors will watch closely for any hints policy makers might raise rates at their next meeting in March.

This week will also offer the latest on the US jobs market, with reports on the employment cost index on Tuesday, ADP employment on Wednesday, weekly jobless claims on Thursday and nonfarm payrolls on Friday.

Chicago Fed President Charles Evans is set to speak on Friday.

Other economic data slated for release this week include personal income and outlays, pending home sales index and Dallas Fed manufacturing survey, due today; S&P Corelogic Case-Shiller home price index, Chicago PMI, and consumer confidence, due Tuesday; motor vehicle sales, the PMI and ISM manufacturing indices, and construction spending, due Wednesday; productivity and costs, due Thursday; as well as the PMI services index, factory orders, and the ISM non-manufacturing index, due Friday.

Apple, Facebook and Amazon.com are among the companies set to report their latest earnings in the coming days.

"Earnings have really just been fine," David Lyon, global investment specialist at JP Morgan Private Bank in San Francisco, told Reuters. "They haven't been too hot, nor have there been any concerns or cautionary flags raised.

“I think fine might not be enough in the near term and there is a growing concern that while the numbers have been good, the forward guidance has been just okay,” according to Lyon.

Last Friday, Microsoft and Intel stocks rose as they reported earnings that bettered expectations, while Starbucks slid after it downgraded its full-year revenue forecast.

For the week, the Dow Jones Industrial Average rose 1.3 percent, while the Standard & Poor’s 500 Index gained 1 percent and the Nasdaq Composite Index added 1.9 percent.

In Europe, the Stoxx 600 Index weakened 0.3 percent on Friday, lowering its gain for the week to 1.1 percent.

BusinessDesk.co.nz

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