World Week Ahead: Eyes on US retail sales, retailers

Monday 9th May 2016

A report on US retail sales will offer a key focus for investors after last week’s weaker-than-expected jobs data practically removed any remaining bets that the Federal Reserve will raise interest rates at its June policy meeting.

On Friday, a Labor Department report showed that US employers added a lower-than-expected 160,000 to their payrolls last month, following a revised 208,000 gain in March. April’s was the smallest increase in seven months.

"This report did very little to make the case for a June rate hike," Gennadiy Goldberg, an interest rate strategist at TD Securities in New York, told Reuters. "The data … really underscores our view that the Fed will want to see more data before hiking rates further."

In recent weeks, the Fed has repeatedly reminded investors that it will be patient with interest rate increases amid global economic headwinds.

Fed officials slated to speak this week include Chicago Fed President Charles Evans and Minneapolis Fed’s Neel Kashkari, today; Cleveland Fed’s Loretta Mester, Boston Fed’s Eric Rosengren, and Kansas City Fed’s Esther George, on Thursday; and San Francisco Fed’s John Williams, on Friday.

Last week the Dow Jones Industrial Average fell 0.2 percent while the Standard & Poor’s 500 Index declined 0.4 percent, and the Nasdaq Composite Index dropped 0.8 percent.

“The top worry is still slower growth than feared and central banks which might stay too passive or even lose the market’s confidence of being in charge,” Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany, told Bloomberg. “We are on thin ice already and we don’t need more disappointment as the Fed is eyeing the job market very closely.”

On Friday, a Commerce Department report is expected to show that US retail sales probably increased in April for the first time this year, according to a Bloomberg survey.

Also this week, retailers Macy's, Nordstrom and Kohl’s are scheduled to post their latest quarter earnings.

In Europe, the Stoxx 600 Index weakened 2.9 percent last week.

Here, investors will eye a gathering by Bank of England policymakers on Thursday. The BOE is expected to hold its key interest rate at a record low. The country is gearing up for a referendum on its European Union membership next month.

On Saturday, Saudi Arabia, the world's top crude oil exporter, appointed Khalid al-Falih, chairman of the state oil giant Saudi Aramco, as its energy minister, replacing Ali al-Naimi, who had held the post for more than two decades. The kingdom also named a new head of its central bank, appointing Ahmed Alkholifey to succeed Fahad Al Mubarak.

Still, a new oil minister is unlikely to signal a change in policy, some analysts said.

"The oil policy is not Naimi's personal policy, it is the kingdom's policy," Richard Mallinson, senior analyst at Energy Aspects, told Reuters.

Last week oil posted a decline, with Brent weakening 6 percent, even as a wildfire in Canada's oil-producing province of Alberta—still growing in size—curbed the country’s output and offered some support to prices.

“The global surplus still exists and there is still a possibility that oil prices could retrace further,” Dominick Chirichella, senior partner at the Energy Management Institute, told Reuters.

BusinessDesk.co.nz

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