World Week Ahead: Data back in focus

Monday 29th May 2017

Investors will eye the latest US jobs data to gauge the odds the Federal Reserve might not raise interest rates as much this year as previously flagged.

Last Friday a Commerce Department report showed gross domestic product grew at a 1.2 percent annual rate in the first quarter, up from last month's estimate of an 0.7 percent pace.

"Economic indicators so far aren't entirely convincing on a second-quarter bounce in activity and show a US economy struggling to surprise on the upside," Scott Anderson, chief economist at Bank of the West in San Francisco, told Reuters.

The data underpin expectations for a more cautious approach towards the timing and pace of further interest rates hikes, as also suggested in the minutes from the Fed’s May meeting, released last Wednesday.

Bets are still that the Federal Open Market Committee will announce an increase at the end of its next two-day meeting on June 14. The FOMC earlier tipped the potential for three hikes in 2017.

US financial markets are closed today for the Memorial Day holiday.

Investors will eye European Central Bank President Mario Draghi’s appearance before the European Parliament Economic Committee today. Expectations are rising that the ECB will signal that its easy policy stance might need to be tweaked if euro-zone data continue to paint a more positive economic outlook.

Shares in both the US and Europe closed little changed to slightly higher ahead of the weekend.

In New York, both the Standard & Poor’s 500 Index and the Nasdaq Composite Index edged to fresh closing highs.

For last week, the Dow Jones Industrial Average climbed 1.3 percent, while the S&P 500 advanced 1.4 percent, and the Nasdaq rallied 2.1 percent.

In Europe the Stoxx 600 Index ended 0.2 percent weaker on Friday, to end the week flat. Britain’s FTSE 100 rose 0.4 percent to a fresh record high on Friday.

“This continues to be a bull market that every one loves to hate,” Jeff Korzenik, the Chicago-based chief investment strategist at Fifth Third Bancorp, which oversees US$33 billion, told Bloomberg. “It’s one reason why we’re bullish. There is none of these euphoria that’s associated with market tops.”

Investors will scrutinise the US ADP employment report and weekly jobless claims on Thursday and the government's nonfarm payrolls report on Friday.

“Solid figures would probably seal the deal on a June rate hike – we forecast a 200,000 increase in non-farm payrolls,” according to Capital Economics.

The firm is forecasting that the US economy is rebounding this quarter at a 2.5 percent to 3 percent annualised pace.

Other reports due this week include personal income and outlays, S&P Corelogic Case-Shiller home price index, and Dallas Fed manufacturing survey, due Tuesday; Chicago PMI, pending home sales index, and farm prices, due Wednesday; motor vehicle sales, productivity and costs, PMI and ISM manufacturing indices, and construction spending, due Thursday; as well as international trade, due Friday.

The Fed also releases its Beige Book on Wednesday.

Fed officials set to speak this week include Robert Kaplan and John Williams, both on Wednesday.

In Europe, the key data point will be May’s reading of inflation to be released on Wednesday.

(BusinessDesk)

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