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World Week Ahead: Fed succession, OPEC, US retail in focus

Monday 27th November 2017

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Federal Reserve Chair Janet Yellen testifies to Congress on the US economic outlook on Wednesday, a day after Jerome Powell, nominated to succeed her in February, will appear in confirmation hearings before the Senate. 

Powell, currently a Fed governor, will appear before the US Senate Committee on Banking, Housing, and Urban Affairs for a full committee hearing on his nomination to become Fed Chairman.

“This should only be market moving if Powell says something unexpected or some Republicans surprise by hinting at opposition,” according to TD Securities in a note on Friday.

On Wednesday Yellen is scheduled to testify before the Congressional Joint Economic Committee in Washington. Other Fed officials scheduled to speak in the coming days include Neel Kashkari and William Dudley today, John Williams on Wednesday, Robert Kaplan on Thursday, as well as James Bullard on Friday. 

“All should stick to the gradualist script,” according to TD Securities. 

The US dollar has weakened since minutes of the most recent Fed meeting, released last Wednesday, prompted expectations that the central bank might not raise interest rates next year as much as previously anticipated.

The Fed also releases its Beige Book on Wednesday

A host of US economic data slated for release this week include reports on new home sales and Dallas Fed manufacturing survey, today; international trade in goods, FHFA house and S&P Corelogic Case-Shiller price indices, consumer confidence, and Richmond Fed manufacturing index, due Tuesday; gross domestic product, corporate profits, and pending home sales index, due Wednesday; weekly jobless claims, personal income and outlays, Chicago PMI, and farm prices, due Thursday; and motor vehicle sales, PMI and ISM manufacturing indices, due Friday. 

Also in focus is the Nov. 30 meeting by top oil producing nations who are expected to extend an agreement to curb output beyond March. 

“With the majority of OPEC members endorsing an extension, Russian support is the key risk,” Jon Rigby, head of oil research at UBS, wrote in a note, according to Reuters.

But first, investors will gauge the results of the busiest shopping weekend of the year. On Thursday, Thanksgiving Day, US shoppers spent more than US$2.87 billion online, Reuters reported on Friday, citing Adobe Analytics. Adobe forecast online Black Friday sales of US$5 billion, which would be a record high, and an additional US$6.6 billion on Cyber Monday, according to Reuters. 

On Friday Macy’s chief executive Jeff Gennette told Bloomberg that the holiday season was off to a strong start, helped by a surge in outerwear sales.

Shares of US retailers rose on Friday, with those of Amazon gaining 2.6 percent and those of Macy's adding 2.1 percent 

US financial markets were closed last Thursday for the Thanksgiving holiday and were open for only part of Friday. 

On Friday, the Dow Jones Industrial Average rose 0.1 percent, the Standard & Poor’s 500 Index added 0.2 percent, while the Nasdaq Composite Index gained 0.3 percent.

The Nasdaq closed at a peak of 6,889.16 on Friday, while the S&P 500 ended at a record high of 2,602.42.

"While for the time being we are clinging to our forecast that the [S&P 500] index will end this year at 2,500, we would put more emphasis on the fact that we don’t envisage a really big drop until the US economy starts to falter," Capital Economics chief markets economist John Higgins said in a note. "In our view, that won’t happen until the year after next, which is why we are forecasting that the index will only slide in 2019 (to 2,150) rather than in 2018 (also 2,500)." 

For the week, the Dow advanced 0.9 percent, as did the S&P 500, while the Nasdaq rallied 1.6 percent.

In Europe, the Stoxx 600 Index ended Friday with a 0.1 percent retreat from the previous day’s close.


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