World Week Ahead: US consumer in spotlight

After October's jobs report firmed expectations that US Federal Reserve policy makers might lift interest rates next month, investors will eye retail sales data to gauge the strength of the mighty American consumer.

Last Friday, a Labor Department report showed payrolls climbed a stronger-than-expected 271,000 in October, while the jobless rate slid to 5 percent. Wage growth also picked up.

"It raises the probability of a December rate rise, but ultimately good economic growth will flow to corporate earnings," Douglas Cote, the New York-based chief market strategist at Voya Investment Management, told Bloomberg.

Indeed, the chance for a December hike rose to 70 percent on Friday, from 56 percent on Thursday, according to the fed funds futures market.

A report this Friday is expected to show retail sales increased 0.3 percent last month, following a 0.1 percent advance in September, according to a Reuters poll. That's a sign of positive momentum heading towards the biggest shopping day of the year, Black Friday, on November 27 and Christmas.

"The consumer should be feeling pretty good heading into the last couple of the months of the year," Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute in Omaha, told Reuters. "We think we could be set up for a little bit of a (stock market) rally here into year-end."

Last week, the Dow Jones Industrial Average climbed 1.4 percent, while the Standard & Poor's 500 Index gained 1 percent, and the Nasdaq Composite rallied 1.9 percent. On Wednesday US bond markets will be closed for Veterans Day; US stock markets will be open.

Retailers Macy's, Kohl's, Nordstrom and JC Penney are among companies reporting their latest earnings in the coming days. Others include Priceline Group and Cisco Systems.

Before the retail sales data, there will be reports on the NFIB small business optimism index, import and export prices, and wholesale trade, due today; weekly jobless claims, due Thursday. Reports on the producer price index, business inventories, and consumer sentiment are also scheduled for release on Friday.

Clues on a December rate hike might come from US policy makers' speeches this week.

Boston Fed President Eric Rosengren is to discuss the US economic outlook today; St Louis Fed President James Bullard, Richmond Fed chief Jeffrey Lacker, Chicago Fed boss Charles Evans, and the New York Fed's William Dudley are all set to speak on Thursday; while Cleveland Fed President Loretta Mester will hold a talk on Friday.

European Central Bank President Mario Draghi speaks in London on Wednesday.

The latest European economic reports include Germany's trade balance and euro-zone Sentix investors confidence, due today; Germany's consumer price index, and euro-zone industrial production, due Thursday; as well as euro-zone GDP and trade balance, due Friday.

Europe's Stoxx 600 Index added 1.2 percent in the past five days.

Meanwhile, Nils Smedegaard Andersen, chief executive officer at AP Moeller-Maersk, told Bloomberg that the world's economy is growing at a slower pace than the International Monetary Fund and other large forecasters are predicting.

"We believe that global growth is slowing down," said Smedegaard Andersen, whose company, owner of the world's biggest shipping line, is a bellwether for global trade,. "Trade is currently significantly weaker than it normally would be under the growth forecasts we see."

China certainly keeps offering further signs of slowing growth. A General Administration of Customs report on the weekend showed China's exports dropped 6.9 percent in October from a year ago, while imports sank 18.8 percent, pushing the country's trade surplus to a record high US$61.64 billion.

(BusinessDesk)