World Week Ahead: Yellen speaks, US jobs data

Tuesday 29th March 2016

US Federal Reserve Chair Janet Yellen is set to speak on Tuesday, offering a key focus for investors before the government’s jobs data are due at the end of the week.

After Fed policy makers signalled earlier this month that they only expect two interest rate increases this year, down from the four anticipated in December, Yellen’s speech at an event hosted by the Economic Club of New York will be closely watched for any further clues on the timing for rate hikes.

Wall Street rose. In New York trading at 1.17pm on Monday, the Dow Jones Industrial Average added 0.2 percent, while the Nasdaq Composite Index eked out a 0.02 percent gain. In 1.02pm trading, the Standard & Poor’s 500 Index advanced 0.2 percent.

“I think today's action will be in anticipation of what Yellen will say tomorrow and if she gives an indication of what they will do in April when they meet,” Mohanned Aama, managing director of Beam Capital Management in New York, told Reuters. “Until we hear something noteworthy from the Fed, I don't think we're going to see any major trading.”

Other Fed officials speaking on Tuesday include San Francisco Fed President John Williams, who will discuss on monetary policy and the global outlook, in Singapore, while Dallas Fed boss Rob Kaplan is due to speak in Austin, Texas.

The Chicago Fed's Charles Evans will speak in New York, on Wednesday, and again on Thursday, while the New York Fed's William Dudley is due to hold a talk in Lexington, Virginia that same day. Cleveland Fed's Loretta Mester will address the New York Association for Business Economics at the Harvard Club in New York on Friday.

The Dow moved higher, led by gains in shares of Walt Disney and those of 3M, last up 1.2 percent and 0.9 percent respectively.

Last week—shortened by the Good Friday holiday—the Standard & Poor’s 500 Index slid 0.7 percent. It was its first weekly slide in six weeks, according to Bloomberg.

A Labor Department report, due Friday, is expected to show that employers in the US added about 200,000 jobs in March and the jobless rate held at an eight-year low of 4.9 percent, according to a Bloomberg poll.

The latest data showed tepid consumer spending last month. A Commerce Department report showed consumer spending rose 0.1 percent in February, following a downwardly revised 0.1 percent increase in January.

“It speaks to the weakening in domestic economic momentum at the start of this year, further reinforcing the Fed's cautious monetary policy bias," Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters.

Indeed, the Fed Bank of Atlanta said it now estimates real gross domestic product growth (seasonally adjusted annual rate) in the first quarter of 2016 of 0.6 percent, down from 1.4 percent on March 24.

Separately, Commerce Department data showed the US trade deficit for goods widened to US$62.9 billion in February, from US$62.2 billion.

US Treasuries advanced, pushing yields on the 10-note three basis points lower to 1.87 percent.

“Real spending numbers are the ones that translate through to GDP, and that was the big story today,” Ian Lyngen, a government-bond strategist at CRT Capital Group in Stamford, Connecticut, told Bloomberg. ”That’s going to detract from people’s estimates for GDP.”

On Monday markets across Europe were also closed for the Easter holiday. Last week, Europe's Stoxx 600 Index fell 1.9 percent.

The latest economic data will arrive in the form of reports on euro-zone confidence, and Germany’s consumer price index due Wednesday; Germany’s unemployment, and the euro-zone consumer price index, due Thursday; as well as euro-zone manufacturing purchasing managers indices, and euro-zone unemployment, due Friday.

(BusinessDesk)

BusinessDesk.co.nz

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