World Week Ahead: Yellen, ECB, OPEC

Monday 30th November 2015

A speech by Federal Reserve Chair Janet Yellen as well as the latest US jobs data will draw the focus in the coming days as investors refine bets that policy makers are set to increase interest rates at their December meeting.

“The market continues to come to peace with the idea that the Fed will do its first increase in mid-December,” David Donabedian, chief investment officer of Atlantic Trust Private Wealth Management, told Bloomberg.

Meanwhile, eyes will also be squarely on the European Central Bank meeting on Thursday, as eurozone policy makers are expected to expand their efforts to boost the region’s economy and inflation.

And finally, Friday’s meeting of members of the Organisation of Petroleum Exporting Countries will garner attention as oil prices continue to suffer from a global excess of supply, with Brent crude at US$44.86 a barrel on Friday and West Texas Intermediate at US$41.71 a barrel.

OPEC is forecast to stick with its strategy of defending market share by maintaining output and driving down higher-cost production elsewhere, according to analysts and traders surveyed by Bloomberg.

Yellen is scheduled to speak at the Economic Club of Washington on Wednesday and deliver testimony to the Joint Economic Committee of the Senate on Thursday.

Several other Fed officials are slated to speak this week too, including Chicago Fed President Charles Evans on Tuesday, Atlanta Fed chief Dennis Lockhart and San Francisco Fed boss John Williams on Wednesday, Cleveland Fed President Loretta Mester and Fed Vice Chair Stanley Fischer on Thursday, as well as Philadelphia Fed chief Patrick Harker, St Louis Fed boss James Bullard and the Minneapolis Fed’s Narayana Kocherlakota on Friday.

A US government report on Friday is expected to show non-farm payrolls rose by 200,000 in November, while the unemployment rate held at 5.0 percent, the lowest in more than seven years. Other US jobs data in the coming days include the ADP employment report on Wednesday and weekly jobless claims on Thursday.

A host of other data set for release this week include Chicago PMI, pending home sales index, and the Dallas Fed manufacturing survey, today; motor vehicle sales, PMI and ISM manufacturing indices, and construction spending, due Tuesday; productivity and costs, and the Fed's Beige Book, due Wednesday; PMI services index, factory orders, and the ISM non-manufacturing index, due Thursday; and international trade, due Friday.

Last week, shortened by the US Thanksgiving holiday, the Standard & Poor’s 500 Index inched 0.04 percent higher.

Meanwhile Europe’s Stoxx 600 Index added 0.5 percent in the past five days.

ECB President Mario Draghi has been vocal about the central bank’s commitment to bolster inflation. A Reuters poll of more than 50 economists predicted that the ECB will cut the deposit rate to -0.3 percent, from -0.2 percent, it will increase its monthly asset purchase program to 75 billion euros per month, from 60 billion euros, and extend the program beyond September 2016.

“Expectations have increased further ahead of [this] week’s ECB meeting and ECB speakers have not done much to rein in expectations,” Deutsche Bank analysts wrote in a note to investors, according to Reuters. “Draghi has overdelivered in the recent past but it could be harder this time given how much has been promised.”

Gold posted its sixth straight week of losses, hitting the lowest level in five years on Friday.

Half of the gold coming from mines may not be viable at current prices, Randgold Resources chief executive Mark Bristow told Bloomberg.

“The more we continue to produce unprofitable gold, the more pressure we put on the gold price,” according to Bristow. “In the medium term, it’s a very bullish outlook for the gold industry. The question is, how long are we going to supply it with unprofitable gold?”

BusinessDesk.co.nz

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