World Week Ahead: Focus on Google, jobs data
A slew of US corporate earnings including from Alphabet, Google's parent company, and the latest government jobs data will feature on investors' radar screens in the coming days.
On Friday the Bank of Japan's unexpected decision to add monetary stimulus further lowered expectations that US Federal Reserve policy makers will raise interest rates again any time soon.
The effective fed funds rate priced into the futures market for year-end fell to about 0.55% on Friday, down from 0.63% a week ago and below the 0.62% level that would imply one more rate increase, according to Bloomberg.
A report on Friday showed US gross domestic product grew at a 0.7% annualised pace in the three months ended in December, in line with expectations. While the US consumer and the country's housing market have shown signs of strength, manufacturing has not.
"Manufacturing is clearly weak, segments of manufacturing are in a recession, so the one thing that continues to keep our head above water on a GDP basis is the consumer," Don Ellenberger, head of multi-sector strategies at Federated Investors in Pittsburgh, told Reuters.
This week offers key reports on the US jobs market including the ADP employment report on Wednesday, weekly jobless claims on Thursday, and the government's nonfarm payrolls on Friday.
"Any sense of weakness in the payroll number or any of the employment statistics we get [this] week would really be a cause for concern," Ellenberger noted.
Friday's Labor Department report is expected to show employers hired fewer workers in January than a month earlier, when payrolls jumped by almost 300,000, while the unemployment rate held at 5% and hourly earnings rebounded, according to a Bloomberg poll.
Last week a bounce in oil prices in which Brent rose nearly 8% while US crude gained more than 4%, amid talk of a potential coordinated effort by Russia and Saudi Arabia to cut production helped equity markets too, including Wall Street.
On Friday, the Dow Jones Industrial Average rallied 2.5%, as did the Standard & Poor's 500 Index, while the Nasdaq Composite Index climbed 2.4%, bolstered by the Bank of Japan's surprise move on stimulus as well as strong corporate results such as from Microsoft
For the week, the Dow rose 2.3%, while the S&P 500 gained 1.8%, and the Nasdaq advanced 0.5%.
Even so, the S&P 500 ended January with a 5.1% slide for the month. That's the worst January for equities in seven years, according to Bloomberg.
"The question is: Do we get it all washed out in January and then move on, or is it a harbinger of doom to come? I don't know if I have a great answer either way," Gina Martin Adams, equity strategist at Wells Fargo Securities, told Bloomberg.
"A significant portion of upside equity returns usually do happen in November, December and January, so to lose the performance in January puts pressure on later this year," Adams noted.
Companies slated to release their latest earnings include Exxon Mobil, General Motors, Pfizer, Merck, Aetna, and Alphabet.
"For the past two quarters Alphabet has delivered strong results beating analysts' estimates," Peter Garnry, head of equity strategy at Saxo Bank in Copenhagen, told Reuters. "Facebook's blowout fourth-quarter results point to strong mobile and video numbers for Google."
In Europe, the Stoxx 600 Index posted a 2.2% increase on Friday. That limited its slide for the month of January to 6.4%.
Here, a meeting of Bank of England policy makers on Thursday will be eyed for clues on interest rates, as they present their latest forecasts for economic growth and inflation.
"The BoJ is the latest surprise but the [European Central Bank] were also dovish, and following some of the commentary from the BoE they're seen as likely to present quite a dovish Quarterly Inflation Report," Jason Simpson, a strategist at Societe Generale in London, told Bloomberg. Also, "turmoil in risk assets-commodities, oil, emerging markets etc-is seen pushing money into safe assets."