World Week Ahead: Central bankers awaited

Monday 1st December 2014

A flurry of central bank meetings and the latest US jobs data will draw the focus of attention in the coming days, while the price of oil will also remain at the forefront.

Oil prices accelerated their slide after Thursday’s decision by the members of the Organisation of Petroleum Exporting Countries to keep their production targets unchanged. The group’s next meeting is scheduled for June 2015.

"We recently moved from an underweight to a neutral weight rating in energy, so directionally we agree with the idea that this weakness is a buying opportunity, but it is very hard to tell where the bottom is," said Tony Roth, chief investment officer at Wilmington Trust in Wilmington, Delaware, told Reuters. "Crude seems to have no floor right now, and we could easily see the price drop into the low US$60s.”

While the slump in the cost of the oil has been a boon for US shoppers in the holiday season, it is a concern for central banks trying to prevent deflation, particularly in the euro zone. A European Union report last week showed that inflation in the euro zone slipped to 0.3 percent in November from a year earlier. That compares with a 2 percent target.

Eyes will be on the European Central Bank meeting this Thursday to see whether President Mario Draghi will boost the level of stimulus, in a bid to stoke inflation, while the bank will also release revised economic forecasts.

Europe’s Stoxx 600 Index ended November with a increase of 3.1 percent for the month, while Germany’s DAX rallied 7 percent, as the ECB began buying covered bonds and asset-backed securities to bolster the euro zone’s flagging economy.

Reports due in the coming days include euro-zone manufacturing PMI, due today; euro-zone producer price index, due Tuesday; euro-zone services PMI, and euro-zone retail sales, due Wednesday; German factory orders, and euro-zone GDP, due Friday.

This week monetary policy makers will also gather in the UK, Canada, Australia, Brazil and Mexico.

Meanwhile, speeches by several US Federal Reserve officials may offer clues on the timing of a US interest rate increase.

Today, New York Fed President William Dudley and Fed Vice Chair Stanley Fischer are scheduled to talk in New York, while Fed Governor Lael Brainard will speak in Los Angeles on Tuesday, and in Washington on Wednesday. The same day, Philadelphia Fed President Charles Plosser is set to speak in Charlotte, North Carolina, while Dallas Fed President Richard Fisher will talk in Dallas.

On Thursday and Friday Cleveland Fed President Loretta Mester will speak in Washington.

On Wall Street last week, the Dow Jones Industrial Average added 0.1 percent, the Standard & Poor’s 500 Index rose 0.2 percent, while the Nasdaq Composite Index rallied 1.7 percent.

The Dow ended the week, during which US markets were closed for the Thanksgiving holiday on Thursday, and closed early on Friday, at a record closing high, increasing its advance for 2014 to 9.9 percent.

Both the Dow and the S&P 500 ended November with a gain of 2.5 percent for the month.

Investors will watch the latest US jobs data, with the ADP employment report on Wednesday, weekly jobless claims on Thursday, and nonfarm payrolls on Friday.

Friday’s Labor Department is expected to show US companies added 228,000 jobs in November, while the unemployment rate held at 5.8 percent, the lowest level since July 2008, according to a Bloomberg poll.

Further clues on the US economy will arrive in the coming days in the form of Gallup's US consumer spending measure, as well as the PMI and ISM manufacturing indices, due today; construction spending, due Tuesday; productivity and costs, PMI services index, ISM non-manufacturing index, and the Beige Book, due Wednesday; international trade, factory orders, and consumer credit, due Friday.

US shoppers kicked off the holiday shopping season on Thanksgiving Day and Black Friday by spending a projected US$12.29 billion on Thursday and Friday, a 0.5 percent decrease from the same two days last year, according to estimates by ShopperTrak.

BusinessDesk.co.nz

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