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World Week Ahead: US jobs data in focus

Monday 2nd May 2016

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The latest US corporate earnings including from Berkshire Hathaway as well as monthly jobs data will draw the focus after last week’s disappointments on both the corporate and economic front took some of the wind out of the bulls’ sails. 

Investors will eye the release of the ADP employment report on Wednesday, followed by weekly jobless claims on Thursday, and April’s nonfarm payrolls on Friday. 

Last week, the Federal Open Market Committee signalled again that it will be exercising patience when it comes to interest rate increases, which offered both relief that borrowing costs won’t rise as much as previously had been anticipated but also underpinned the impact of international headwinds on the US economy.

“With the inactivity and ineffectiveness progressively for central bank policy, there’s still certainly a lot of hand-wringing to be done,” Mike Moran, head of economic research for the Americas at Standard Chartered Bank, told Bloomberg. “It underscores the issue—we’re not in a very strong growth environment globally.”

Indeed, a report on Friday showed that US consumer confidence weakened more than expected last month, to the lowest level in seven months, while a separate report showed consumer spending increased less than expected in March.

“Consumer sentiment continued its slow decline in April due to weakening expectations for future economic growth, although their views of their current finances remained positive,” Richard Curtin, director of the University of Michigan consumer survey, said in a statement.

“The top concerns of consumers involve whether the slowdown in economic growth will result in a slower pace of income and job gains, and growing uncertainty about future economic policies depending on the outcome of the presidential election," Curtin noted. “On both counts, consumers have already adopted a more defensive stance.”

Other US reports scheduled for release in the coming days include PMI and ISM manufacturing indices, and construction spending, due today; motor vehicle sales, due Tuesday; international trade, productivity and costs, factory orders, the PMI services index and ISM non-manufacturing index, due Wednesday; and consumer credit, due Friday. 

Several Fed policy makers will take the stage this week, and will be watched closely for any clues on the timing of a rate rise. As of last Friday, futures show traders assign a mere 12 percent probability that the central bank will boost borrowing costs by June, down from a 20 percent chance a week earlier, according to Bloomberg. 

Atlanta Fed President Dennis Lockhart and San Francisco Fed boss John Williams will speak today, followed by Cleveland Fed's Loretta Mester and Lockhart on Tuesday as well as Minneapolis Fed's Neel Kashkari on Wednesday. St Louis Fed's James Bullard, Dallas Fed's Robert Kaplan, Lockhart, and Williams are on a panel, on Thursday.

Pfizer, Tesla, News Corp and Time Warner are among the US companies slated to report their latest results. 

Last week the Dow Jones Industrial Average fell 1.3 percent, as did the Standard & Poor’s 500 Index, while the Nasdaq Composite Index dropped 2.7 percent. 

Some of the latest US corporate earnings didn’t help sentiment. Shares of Apple, which posted disappointing earnings, sank 11 percent last week. Carl Icahn on Thursday said he sold his position in the company.

"If you're going to buy Apple, you have to buy it for the long term, because the next year or two are going to be very tough," Michael Yoshikami, chief executive of Destination Wealth Management, which owns Apple shares, told Reuters.

On Friday shares of Gilead Sciences sank 9.1 percent after the company posted first-quarter profit that fell short of expectations. 

To be sure, shares of Amazon soared 9.6 percent on Friday after the company reported results that surpassed expectations, posting its largest-ever net income. Facebook also surged last week on strong results.

Indeed, analysts remain upbeat about the overall outlook for Wall Street. 

“[Friday's] fall is just noise after the massive movement we've seen in the past few weeks," Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St Louis, told Reuters.

In Europe, the Stoxx 600 Index shed 2.1 percent on Friday. The index posted a 2 percent slide for the week.

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