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World Week Ahead: Focus on US jobs data

Investors will scrutinise the latest US labour market data to gauge the timing of a Federal Reserve interest rate increase as Wall Street returned to record highs amid optimism central banks will remain supportive of propelling economic growth. 

Margreet Dietz
Mon, 03 Nov 2014

Investors will scrutinise the latest US labour market data to gauge the timing of a Federal Reserve interest rate increase as Wall Street returned to record highs amid optimism central banks will remain supportive of propelling economic growth. 

Investors will eye speeches by several Fed officials in the coming days for further clues on the timing for a rate hike. Last week the Fed announced the end of its monthly asset purchases and signalled a level of confidence in the pace of the US economic recovery that was stronger than some had anticipated.

Today, Chicago Fed President Charles Evans will speak in Chicago, while Dallas Fed President Richard Fisher is scheduled to give a talk in New York.

On Wednesday, there are speeches by Minneapolis Fed President Narayana Kocherlakota, Richmond Fed President Jeffrey Lacker, and Boston Fed  President Eric Rosengren, and the next day by Fed Governor Jerome Powell and Cleveland Fed President Loretta Mester. 

Both policy makers and investors will pour over the ADP employment report on Wednesday, weekly jobless claims on Thursday, and the government's monthly employment report on Friday.

Friday’s data are expected to show American employers added about 235,000 jobs in October, while the jobless rate held at a six-year low of 5.9 percent, according to a Bloomberg survey.

“Labour market conditions improved somewhat further, with solid job gains and a lower unemployment rate,” the Federal Open Market Committee said in a statement at the end of its October 28-29 meeting. “On balance, a range of labour market indicators suggests that underutilisation of labour resources is gradually diminishing. “

On Wall Street last week, the Dow Jones Industrial Average jumped 3.5 percent, the Standard & Poor’s 500 Index added 2.7 percent, while the Nasdaq Composite Index climbed 3.3 percent.

Equity markets rallied after the Bank of Japan on Friday lifted its monetary stimulus in a surprise move by increasing its annual stimulus target to 80 trillion yen (US$712 billion), up from 60 to 70 trillion yen. Also, the country’s government's pension fund said it will buy more global equities in a bid to diversify its investments and, as there are billions of dollars, there are expectations that will bolster demand for equities and keep valuations high or push them still higher.

“Markets don’t really seem to care about what kind of stimulus we get or where it’s coming from, as long we get something,” Teis Knuthsen, chief investment officer at Saxo Bank’s private-banking unit, told Bloomberg News.

A slew of other US economic data scheduled for release in the coming days include the PMI and ISM manufacturing indices, motor vehicle sales, and construction spending, due today; international trade and factory orders, due Tuesday; PMI services index and ISM non-manufacturing index, due Wednesday; productivity and costs, due Thursday; and consumer credit, due Friday.

"Economic growth [in the US] is looking pretty good, earnings are good ... we will end the year certainly closer to 2,100 than 2,000 on the S&P 500,” Paul Zemsky, chief investment officer of multi-asset strategies and solutions at Voya Investment Management in New York, told Reuters.

Last week’s gains helped lift the S&P 500 to a closing record of 2,018.05 on Friday, while bolstering the Dow to a closing record of 17,390.52.

Over the weekend, China’s economy showed further signs of weakness. China's factory activity posted a surprise drop to the lowest level in five months in October, as the official Purchasing Managers' Index slipped to 50.8, down from 51.1 in September.

In Europe, the Stoxx 600 Index recorded a 2.9 percent advance last week, while the FTSE 100 Index gained 2.5 percent. 

On Thursday, European Central Bank policy makers will gather for the first time since the central bank began asset purchases in an effort to prop up the euro-zone economy and stave off deflation. 

On Friday a report showed consumer prices in the euro zone rose by 0.4 percent in October.

Nick Kounis, head of macro research at ABN AMRO, told Reuters that ECB action as early as this week was unlikely, but that he expected further measures by the first quarter of next year.

"We still think that the ECB is likely to further step up its monetary easing," he said. "If you get any kind of economic shock with inflation this low, there is a risk, albeit a small risk, of deflation."

Bank of England policy makers also gather on Thursday. 

In terms of economic data, the coming days will bring data on euro-zone manufacturing PMI, due today; euro-zone producer prices, due Tuesday; euro-zone services PMI and euro-zone retail sales, due Wednesday; German factory orders, due Thursday; and German industrial production as well as trade balance, due Friday. 


Margreet Dietz
Mon, 03 Nov 2014
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World Week Ahead: Focus on US jobs data