World Week Ahead: US data due, Yellen speaks

The latest US economic data and speeches by several Federal Reserve officials including chairwoman Janet Yellen will form a key focus as investors are coming to terms with the prospect of a US interest rate hike as early as next month.

On Friday, Mrs Yellen will speak, together with Harvard Professor Gregory Mankiw in Massachusetts.

Other Fed officials will take the stage including St Louis Fed President James Bullard in Beijing, San Francisco Fed's John Williams, and Philadelphia Fed's Patrick Harker, today; Dallas Fed's Robert Kaplan, on Wednesday; and Fed Governor Jerome Powell on Thursday.

Minutes from the April Federal Open Market Committee, released last Wednesday, as well as comments by Fed officials including New York Fed president William Dudley showed investors there was a chance of a rate increase at the FOMC's June meeting.

By the end of last week, futures traders saw a 26% probability that policy makers will boost rates when they meet next month, up from a 4% chance at the start of the week, according to Bloomberg.

On Friday, the New York Fed said the US economy is on track to expand at an annualised rate of 1.7% in the second quarter, half a%age point higher than estimated a week earlier.

"Positive news came from manufacturing and housing data and was only slightly offset by negative news from survey data," the New York Fed said in its so-called Nowcasting Report.

Last week the Dow Jones Industrial Average fell 0.2%. However, the Standard & Poor's 500 Index rose 0.3%, and the Nasdaq Composite Index gained 1.1%.

"The market is starting to come to grips with the Fed potentially moving in June," Walter Todd, chief investment officer at Greenwood Capital Associates in Greenwood, South Carolina, told Reuters. "I think it's potentially a positive dynamic if the market can actually go up in the face of the Fed probability going up."

US treasuries declined last week, with yields on the benchmark two-year note rising 13 basis points. The US dollar strengthened.

The latest data on the US economy will show up in the form of reports on the PMI manufacturing index, today; new home sales and the Richmond Fed manufacturing index, due Tuesday; international trade in goods, the FHFA house price index, and the PMI services, due Wednesday; durable goods orders, weekly jobless claims, the pending home sales index, and the Kansas City Fed manufacturing index, due Thursday; and the second estimate for first-quarter gross domestic product, as well as consumer sentiment, due Friday.

In Europe, the Stoxx 600 Index posted a gain of 1% last week; the index rallied 1.2% on Friday.

Meanwhile, Iran reiterated that it has no plans to freeze its oil output anytime soon. Indeed, the country's oil exports will likely surpass 2.2 million barrels a day within a few months, Rokneddin Javadi, managing director of National Iranian Oil, told Mehr news agency, Bloomberg reported.

The comments come ahead of an Opec meeting on June 2.

"The government has no plans for the time being to freeze or interrupt its increase in oil output and exports based on plans that are being carried out," Mr Javadi said, according to Bloomberg. "In the current context, the oil ministry and the government have issued no policy or program to halt the increase in production and exports and so, the country's plans to increase crude output continues."

Oil posted a gain last week, underpinned by concern about production in Canada, Libya and Nigeria.

"The overall market sentiment remains biased to the upside as a growing contingency of market participants are of the view that the market is already in a rebalancing pattern and the current round of unscheduled production cuts are starting to accelerate the process," Dominick Chirichella, senior partner at the Energy Management Institute, told Reuters.

(BusinessDesk)