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World Week Ahead: Eyes on Yellen

Monday 26th June 2017

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Investors will scrutinise Tuesday’s comments by US Federal Reserve Chair Janet Yellen who’s slated to speak in London about global economic issues to gauge the likelihood of a third US interest rate rise this year. 

Other Fed officials will also be closely watched in coming days, with John Williams speaking today, Tuesday and Wednesday while in Australia, Patrick Harker and Neel Kashkari speak on Tuesday, and James Bullard on Thursday. 

Also, on Wednesday, the Fed is scheduled to announce the second part of the results of its annual US bank stress tests. Last week, the nation’s 34 largest banks passed the first part, with the Fed saying all had “strong capital levels and retain their ability to lend to households and businesses during a severe recession.”

"If there is disappointment [this] week, it is likely because the banks failed to ask for big enough distributions more than it is because the Federal Reserve was too tough,” Jaret Seiberg, a policy analyst with Cowen & Co, told Reuters.

The latest earnings season is also getting underway. On Thursday Nike is set to report its quarterly results.

The economic data slated for release this week include durable goods orders, Chicago Fed national activity index and Dallas Fed manufacturing survey, due today; S&P Corelogic Case-Shiller home price index, consumer confidence, and Richmond Fed manufacturing index, due Tuesday; international trade in goods, Energy Information Administration's weekly petroleum status report, and pending home sales index, due Wednesday; gross domestic product, weekly jobless claims, corporate profits, and farm prices, due Thursday; as well as personal income and outlays, Chicago PMI and consumer sentiment, due Friday. 

Last week, the Dow Jones Industrial Average eked out a 0.05 percent gain, the Standard & Poor’s 500 Index rose 0.2 percent, while the Nasdaq Composite Index rallied 1.8 percent as health-care stocks surged.

On Friday, the Dow edged 0.01 percent lower, as declines in shares of Home Depot and those of Goldman Sachs, down 2.7 percent and 1.2 percent respectively, offset gains in shares of Visa and those of Boeing, up 1.7 percent and 1.4 percent respectively. The S&P 500 rose 0.2 percent, while the Nasdaq gained 0.5 percent.

Shares of Whole Foods slipped 0.6 percent to US$42.95 after rising as high as US$43.84 earlier in the session. That’s still above the US$42 a share Amazon has agreed to pay for the supermarket chain.   

Wal-Mart Stores is not actively considering making an offer for Whole Foods, a source familiar with the matter told Reuters on Friday.

Whole Foods, which accepted Amazon’s US$13.7 billion offer earlier this month, has not received any rival bids as of Friday, a second source said, according to Reuters. Both sources spoke on condition of anonymity because the matter is confidential.

Wal-Mart spokesman Greg Hitt declined to comment on whether the company is considering a bid for Whole Foods, while Whole Foods and Amazon did not immediately respond to requests for comment, according to Reuters. 

Oil posted its fifth weekly drop amid concern that efforts by OPEC and its non-OPEC allies to ease the global glut have had little impact with increasing production elsewhere, notably in the US and Libya. On Friday West Texas Intermediate crude settled at US$43.01 a barrel.

Weak oil prices might weigh on corporate earnings. 

"A lot of the expectation for a recovery in earnings is predicated on oil prices being around US$47-US$50 a barrel," Hugh Johnson, chief investment officer of Hugh Johnson Advisors in Albany, New York, told Reuters. "So if you don't get those numbers, you don't get the strong earnings the stock market needs. This is not trivial stuff. It creates a lot of uncertainty and volatility in forecasts."

In Europe, the Stoxx 600 Index fell 0.2 percent last Friday, bringing its retreat for the week to 0.3 percent. 





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