World Week Ahead Eyes on US jobs

Monday 3rd March 2014

Investors will be paying close attention to the latest US employment data this week to gauge whether the Federal Reserve will continue to rein in its massive bond-buying programme.

Friday's government employment data are expected to show US employers probably added 150,000 jobs in February, while the jobless rate remained at 6.6 percent, according to Bloomberg News.

But first there is the ADP employment report, due Wednesday, and weekly jobless claims, due Thursday.

Most economic data this year have been dampened by colder-than-usual winter in much of the US. A report on Friday showed the US economy expanded at a 2.4 percent annualised rate in the final three months of 2013, down from an earlier 3.2 percent estimate.

US policy makers including Federal Reserve Chairman Janet Yellen and most analysts believe that data will improve along with the temperatures. Still, all are looking forward to some hard evidence to support that theory.

"The market continues to believe that weather is behind most of it, and we generally agree with that, but we will need to see a pick-up" in the economy, Bill Stone, chief investment strategist at PNC Wealth Management in Philadelphia, told Reuters.

In the past five days, the Dow Jones Industrial Average climbed 1.4 percent, the Standard & Poor's 500 Index rose 1.3 percent, while the Nasdaq Composite Index gained 10.46 percent. For February, the Dow rose 4 percent, as did the S&P 500, and the Nasdaq advanced 5 percent.

In testimony to the Senate last week, Yellen suggested the tapering of the Fed's bond purchases, currently at US$65 billion a month, remains on track, a sign that investors took as optimism about the outlook.

Among other optimists is Berkshire Hathaway Chairman Warren Buffett.

"Charlie [Munger] and I have always considered a 'bet' on ever-rising US prosperity to be very close to a sure thing," Buffet said in a letter to shareholders with the company's annual report and quarterly results, released on Saturday.

"Indeed, who has ever benefited during the past 237 years by betting against America?" Buffett said. "If you compare our country's present condition to that existing in 1776, you have to rub your eyes in wonder. And the dynamism embedded in our market economy will continue to work its magic. America's best days lie ahead."

On Tuesday, the White House releases its US budget plan for fiscal 2015, while the Fed will publish its Beige Book analysis of economic conditions the next day.

Several Fed officials are scheduled to talk in the coming days. On Tuesday, Richmond Fed President Jeffrey Lacker will speak in New York; on Wednesday, Dallas Fed President Richard Fisher will give a talk in Mexico City, while San Francisco Fed President John Williams will discuss the economic outlook, in Seattle.

On Thursday, Atlanta Fed President Dennis Lockhart will speak about the economic outlook in Washington, while New York Fed President William Dudley will discuss the economy in New York on Friday.

In Europe, the Stoxx 600 Index rose 0.6 percent last week, as did France's CAC 40, while Germany's DAX added 0.4 percent. The UK's FTSE 100 shed 0.4 percent for the week.

Last week, the European Commission upgraded its outlook for the region, saying it now expects the euro-zone economy to expand to 1.2 percent in 2014, compared with an earlier prediction for 1.1 percent.

On Thursday the European Central Bank and Bank of England will announce decisions on interest rates.

As the week begins though, the prospect of conflict-even war-in the Ukraine could put investors on the defensive.

In addition, a key Chinese factory index has slid to an eight-month low days before the government there is to detail plans for the economy.

BusinessDesk.co.nz

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