World Week Ahead: US jobs data looms

With Federal Reserve policy makers signalling in recent days that a September interest rate increase still remains a possibility, investors will scrutinise this week's US jobs data much more closely.

The latest check on the labour market will come from the ADP employment report on Wednesday, weekly jobless claims on Thursday, and the federal government's non-farm payrolls on Friday.

Following last week's wild global equities and commodities price swings on concern about China's economy, expectations that the Fed would lift rates at its next policy meeting, in September, had dropped. But Fed vice-chairman Stanley Fischer on Friday kept the door open for a move next month and he was more forthright a day later.

"With inflation low, we can probably remove accommodation at a gradual pace," Fischer said on Saturday in Jackson Hole, Wyoming at the Fed's annual gathering of policy makers from around the world.

Fischer did qualify his remarks, slightly: "Yet, because monetary policy influences real activity with a substantial lag, we should not wait until inflation is back to 2% to begin tightening."

Fed chairwoman Janet Yellen did not attend the Jackson Hole meetings.

Fed officials set to speak this week include Boston Fed President Eric Rosengren in New York, on Tuesday, Minneapolis Fed President Narayana Kocherlakota in Missoula, Montana, on Thursday, and Richmond Fed President Jeffrey Lacker in Richmond on Friday.

Wall Street survived the week with a net gain that belied its deep slump and the steep recovery that followed: the Dow Jones Industrial Average rose 1.1% the past five sessions, the Standard & Poor's 500 Index added 0.9, while the Nasdaq Composite Index rallied 2.6%.

The Federal Open Market Committee's next two-day meeting starts on September 16. Investors see a 38% chance the Fed will move in September and a 49% probability of a rate rise at the October meeting, according to Bloomberg on Friday.

"There is a narrative out there that the Fed is looking for a reason to delay the rate hike; I don't think that is necessarily the case," Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts, told Reuters.

"If we continue this run of strong data and if the market keeps coming back or at least doesn't keep dropping, that makes September more likely," McMillan said.

Other reports scheduled for release in the coming days include Chicago PMI, and Dallas Fed manufacturing survey, due today; motor vehicle sale, Purchasing Managers Index and Institute of Supply Management's manufacturing indices, and construction spending, due Tuesday; productivity and costs, and factory orders, due Wednesday; international trade, PMI service index, and the ISM non-manufacturing index, due Thursday.

The Fed will release its Beige Book (a regular summary of commentary on current economic conditions) on Wednesday.

As for the outlook for stocks, they may not have arrived in calm waters yet.

"We're not done with all the volatility in equities," Andrew Brenner, the head of international fixed income for National Alliance Capital Markets, told Bloomberg. "I think the worst is over, but are we out of the woods yet? No – we're still going to have a lot of volatility."

In Europe, the Stoxx 600 Index rose 0.6% last week.

European Central Bank policy makers gather on Thursday.

The latest data on the eurozone economy will arrive in the form of German retail sales and the eurozone consumer price index, due today; euro-zone manufacturing, and unemployment, due Tuesday; euro-zone producer price index, due Wednesday; euro-zone services, and retail sales, as well as German factory orders, and euro-zone retail PMI, due Friday.

Oil also recovered in the latter half of the week, with both US crude and Brent gaining more than 10% over the past five days. Even so, the outlook remains shaky amid the prospect of still slower growth in China and no sign that producers will cut back production any time soon. In fact, most traders expect the global glut to worsen in the months ahead.

(BusinessDesk)