World Week Ahead: Fed meeting, US jobs

Investors await outcome of Federal Open Market Committee meeting for hinks on rate hike timing.

The US Federal Reserve meeting ending Wednesday, as well as the latest monthly US jobs data, followed by a speech from Fed chair Janet Yellen may help propel the bull market to fresh highs.

The Federal Open Market Committee, beginning its two-day meeting on Tuesday, is not expected to raise interest rates. But having signalled two more hikes this year, investors will eye the FOMC statement for any clues about when they might plan to do so.

Indeed, some data such as an increase in business spending might suggest the Fed is underestimating the economy's strength.

"We have lulled ourselves into this view that growth is slow and productivity is low," Torsten Slok, chief international economist at Deutsche Bank, told Bloomberg. The risk that the Fed is falling behind the curve on interest rates is "what keeps most FOMC members sleepless at the moment."

Yellen is scheduled to speak on Friday, as are Stanley Fischer, John Williams, James Bullard, Charles Evans, and Eric Rosengren.

First the latest US jobs data will arrive in the form of the ADP employment report on Wednesday, weekly jobless claims on Thursday, and the government's nonfarm payrolls on Friday.

Last Friday, a Commerce Department report showed US gross domestic product increased at a 0.7 percent annual rate in the first quarter, which marked the slowest pace in three years.

The lower-than-expected data, while not yet considered a cause for concern, arrived on the same day US President Donald Trump marked his 100th day in office.

"It marks a rough start to the administration's high hopes of achieving 3 percent or better growth; this is not the kind of news it was looking for to cap its first 100 days in office," Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, told Reuters.

The latest US corporate earnings data including from Alphabet and Amazon last week were brighter, bolstering Wall Street. The tech-heavy Nasdaq Composite Index touched another record high during the session on Friday before closing marginally lower.

For the week, the Dow Jones Industrial Average rallied 1.9 percent, while the Standard & Poor's 500 Index climbed 1.5 percent, and the Nasdaq surged 2.3 percent.

"Earnings are through-the-roof good," Stephen Massocca, senior vice president at Wedbush Securities in San Francisco, told Reuters. "Companies are very profitable, and potentially are going to be more profitable with tax-cut legislation."

Apple, Facebook, Fitbit, Merck, Pfizer and Berkshire Hathaway are among many US companies set to report their latest quarterly earnings this week.

Other US economic data slated for release this week include motor vehicle sales, personal income and outlays, PMI and ISM manufacturing indices, and consumer spending, due today; PMI services index, the ISM non manufacturing index, due Wednesday; international trade, productivity and costs, and factory orders, due Thursday; and consumer credit, due Friday.

In Europe the Stoxx 600 Index climbed 2.4 percent last week.

Today European markets, as well as many across Asia, are closed for the Labour Day holiday.

Europe's latest economic data due this week include eurozone manufacturing and unemployment rate, due Tuesday; eurozone producer price index and GDP, due Wednesday; eurozone services PMI, due Thursday; and eurozone retail PMI, due Friday.

Investors will also be positioning themselves for the second round of the French presidential election on May 7.

(BusinessDesk)