World Week Ahead: US jobs, rate outlook

Monday 28th November 2016

The latest US jobs data, an OPEC meeting as well as two speeches by European Central Bank President Mario Draghi will draw the attention of investors in the coming days.

With bets firmly in place that the Federal Reserve will raise its key interest rate at its December meeting, investors will scrutinise the ADP employment report on Wednesday, weekly jobless claims on Thursday, and the government's nonfarm payrolls on Friday. The focus now is on the outlook for the world’s largest economy and how many rate hikes might there be in 2017.

Other US economic data scheduled for release this week include the Dallas Fed manufacturing survey, due today; gross domestic product, S&P CoreLogic Case-Shiller home price index, and consumer confidence, due Tuesday; personal income and outlays, Chicago PMI and the pending home sales index, due Wednesday; as well as weekly jobless claims and the ISM manufacturing index, due Thursday.

The Fed also releases its Beige Book on Wednesday.

Meanwhile, fresh clues on US rates may also come from Fed officials slated to speak in the coming days, including Stanley Fischer and William Dudley on Tuesday, Robert Kaplan, Jerome Powell and Loretta Mester on Wednesday, and Daniel Tarullo on Friday.

On the other side of the Atlantic, the ECB’s Draghi is scheduled to speak today, at the European Parliament in Brussels, Belgium and on Wednesday in Madrid, Spain.

Also today, the OECD will release its latest Economic Outlook.

Wall Street rose last Friday, with the Dow Jones Industrial Average, the Standard & Poor’s 500 Index and the Nasdaq Composite Index all closing at record highs.

“We’re still seeing money coming out of bond funds and into stock funds and it’s interesting the perspective investors are taking,” Eric Wiegand, senior portfolio manager at the Private Client Reserve of US Bank in New York, told Bloomberg.

“To sustain any meaningful advances from here, we need to see earnings growth,” Wiegand said. “The big watch will be for inflation expectations because that tends to be a bit of a weight on market multiples.”

In trading last week, shortened to four days by the Thanksgiving holiday, the S&P 500 added 1.4 percent.

“People are looking for value in the market," Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey, told Reuters. “While many stocks have risen quite briskly, investors are looking for some forgotten names in the rally.”

In Europe, the Stoxx 600 Index gained 0.2 percent on Friday to close at the highest level in one month.

“European equities are a prime target as we see US stocks as being expensive, and with [US] dollar strength they can use their expensive paper and higher dollar to buy European assets,” Gerard Lane, chief investment officer of Artorius Wealth in London, told Bloomberg. “How long it continues given rising bond yields and increasing cost of finance may be an issue.”

The prospect of corporate deals bolstered European health-care stocks.

Shares of Switzerland's Actelion jumped 17 percent on Friday after the drugmaker said it is in talks with Johnson & Johnson about a potential takeover by its larger US rival.

Actelion is working with an adviser to explore options, and the deliberations are still at an early stage following J&J’s initial offer, Bloomberg reported, citing a people familiar with the matter. The company may also attract other suitors, such as Novartis and Sanofi, other sources said.

Oil prices will take their cue from whether the world’s largest producers can agree on the details of a reduction in output as reached in Algiers in September. Last Friday prices dropped amid doubt the Organisation of the Petroleum Exporting Countries will succeed amid reports Saudi Arabia would not attend a meeting with non-OPEC producers today.

"There has to be a substantial cut and it has to be something that the street will believe,” Tariq Zahir, managing member at Tyche Capital in New York, told Reuters.

BusinessDesk.co.nz

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