World Week Ahead: US data, Greece set agenda

Monday 22nd June 2015

A slew of US economic data will be eyed after Federal Reserve chair Janet Yellen last week said the economy is improving and signalled that she expects the US central bank to lift interest rates within the next six months.

Separately, negotiations between Greece and its international creditors are finally reaching a critical point. After months of pushing back against austerity measures, the Greek government has offered a slew of concessions, a day before euro leaders are to gather in Brussels for an emergency session on the fiscal fate of the nation.

"We've had deadlines and more deadlines, and none of them actually turned out to be final, but now we're approaching what is going to be a final deadline," Sonja Marten, FX strategist at DZ Bank in Frankfurt, told Reuters.

Last week, the Dow Jones Industrial Average gained 0.7 percent, the Standard & Poor’s 500 Index rose 0.8 percent, while the Nasdaq Composite Index climbed 1.3 percent. The Nasdaq hit record highs last week.

“Europe seems to think the Greece situation is under control and if something does happen, it won’t cause contagion,” Yousef Abbasi, the global market strategist at JonesTrading Institutional Services in New York, told Bloomberg.

US Treasuries also gained, pushing yields on the 10 year note 13 basis points lower last week.

Investors will receive an update on the American housing industry with reports on existing home sales today, as well as the FHFA house price index and new home sales on Tuesday.

Other clues on the US economy will show up in the form of reports on the Chicago Fed national activity index, due today; durable goods orders, PMI manufacturing index, Richmond Fed manufacturing index, due Tuesday; GDP, due Wednesday; weekly jobless claims, personal income and outlays, PMI services, due Thursday; and consumer sentiment, due Friday.

Last Friday, Fed Bank of San Francisco President John Williams said US policy makers will likely raise rates in 2015.

“I still believe this will be the year for liftoff, and I still believe that waiting too long to raise rates poses its own risks” Williams, a voting member of the Federal Open Market Committee, said in a speech in San Francisco. “I see a safer course in starting sooner and proceeding more gradually.”

“All in all, things are looking good, despite some mixed signals from the data from earlier in the year,” Williams said. “I see growth on a good trajectory, full employment in sight, wages on the rise, and inflation gradually moving back up to meet our goal.”

Corporate deals keep flowing, suggesting valuations are not yet topping out. Over the weekend, health insurers took centre stage. Anthem offered to buy Cigna for about US$47 billion.

“This combination is the absolute best strategy for both organizations to maximize the potential and lead the transformation of the health care industry,” Joseph Swedish, chief executive officer of Anthem, said in a statement.

Meanwhile, Aetna made a takeover proposal to Humana in the last few days, the Wall Street Journal reported.

Last week, Europe’s Stoxx 600 Index fell 1 percent. On Friday, the Stoxx 600 gained 0.4 percent, while Greece’s ASE Index advanced 0.6 percent, as the European Central Bank lifted the amount Greek lenders can borrow under its emergency funding program.

There are reports on eurozone consumer confidence, due today; eurozone manufacturing and services PMI indices, due Tuesday; Germany’s IFO business climate index, due Wednesday; and German consumer sentiment, due Thursday.

BusinessDesk.co.nz

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