World Week Ahead: Eyes on Draghi, UK voters

Tuesday 6th June 2017

With Wall Street still near record highs, investors will eye European Central Bank President Mario Draghi for any signal of a pending policy tweak as well as UK elections on Thursday.

ECB policy makers are set to gather on Thursday and Draghi’s post-meeting comments are expected to reflect recent signs that the eurozone economy is improving.

“The ECB is likely to change its forward guidance at its policy meeting on Thursday, dropping the references to lower interest rates and expanding QE,” according to Capital Economics economist Jack Allen.

“But Mr Draghi will want to avoid stoking expectations of imminent policy tightening, so he is likely to repeat that the Governing Council has not discussed tapering QE, and that interest rates will remain low for a long time,” Allen noted.

Also on Thursday, UK voters head to the polls as the position of Prime Minister Theresa May looks far shakier than when she called for snap elections.

In terms of the latest eurozone data, investors will eye reports on retail sales on Tuesday as well as gross domestic product on Wednesday.

Also on Wednesday, the OECD is set to publish its latest Global Economic Outlook.

Last Friday's US jobs data kept alive expectations that the Federal Open Market Committee will hike interest rates in its next two-day meeting ending June 14, though made the pace of further hikes seem less certain.

A Bureau of Labour Statistics report showed US employers added fewer jobs than expected last month, with nonfarm payrolls rising by 138,000, compared with economists’ expectations for 185,000. Job growth for March and April were both revised downward.

“The unemployment number that came out was well below expectations, and we have a market that’s starting to rethink the Fed’s strategy,” Andrew Brenner, head of international fixed income for National Alliance Capital Markets, told Bloomberg.

Still, the unemployment rate declined to 4.3 percent, its lowest level since 2001. Average hourly earnings rose 0.2 percent in May, climbing 2.5 percent year-on-year.

"It’s certainly surprising. It doesn’t really correlate well with virtually all the other data on the labour market that we’re seeing," Russell Price, senior economist at Ameriprise Financial Services in Troy, Michigan, told Reuters.

US economic data slated for release in the coming days include JOLTS, due Tuesday; consumer credit, due Wednesday; weekly jobless claims, due Thursday; and wholesale trade, due Friday.

Last week—shortened to four days by the Memorial Day holiday, the S&P 500 index climbed 1 percent, the Dow Jones Industrial Average added 0.6 percent and the Nasdaq Composite rallied 1.5 percent.

(BusinessDesk)

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