World Week Ahead: US consumer and Yellen

Monday 13th July 2015

While the drama of Greece is capturing the headlines as the week begins, the focus will shift to the US where retail sales and Federal Reserve Chair Janet Yellen’s two days of Congressional testimony set the agenda.

This week also marks an acceleration in second quarter results from American companies with banks as the highlights. On Tuesday, there’s JPMorgan Chase & Co, Wells Fargo & Co as well as Johnson & Johnson and railway CSX.

On Wednesday, there’s US Bancorp, BlackRock, Bank of America as well as Kinder Morgan, Netflix, Intel and Delta Air Lines. On Thursday, there is Goldman Sachs Group, Citigroup, Blackstone Group, Charles Schwab as well as EBay, Google and Advanced Micro Devices.

Ahead of Yellen’s testimony to the House of Representatives financial services committee on Wednesday, and to the Senate banking committee on Thursday, the Fed chief on Friday said she still sees the central bank lifting interest rates before the end of 2015.

In a speech in Cleveland, Yellen said she expects “moderate economic growth” as the year progresses, though she flagged concern about the continuing weak jobs market and in particular the low participation rate.

Yellen said it appeared to her that many people had given up on looking for work because they perceived there to be few available positions and she also said there were still a lot of people working part time who sought full time jobs.

“Based on my outlook, I expect that it will be appropriate at some point later this year to take the first step to raise the federal funds rate and thus begin normalising monetary policy,” Yellen said, adding, “But I want to emphasise that the course of the economy and inflation remains highly uncertain, and unanticipated developments could delay or accelerate this first step.”

The probability of a Fed rate increase at its December meeting moved up to 67 percent from 54 percent on July 8, according to futures data compiled by Bloomberg. For September, the odds increased to 33 percent from 21 percent.

“I think the economy is going to do much better in the second half, and I think the Fed is dying to go,” Byron Wien, vice chairman of the advisory services unit at Blackstone Group, said on the television program “Wall Street Week” Sunday.

On Wall Street last week, the Dow Jones Industrial Average gained 0.2 percent. The Standard & Poor’s 500 Index barely budged, closing 0.01 percent lower for the week, while the Nasdaq Composite Index slipped 0.2 percent.

In the coming days, a slew of fresh US economic data will arrive in the form of reports on the NFIB small business optimism index, retail sales, import and export prices, and business inventories, due Tuesday; producer price index, Empire State manufacturing survey, industrial production, and Atlanta Fed business expectations, due Wednesday; weekly jobless claims, Philadelphia Fed business outlook survey, and housing market index, due Thursday; as well as the consumer price index, housing starts, and consumer sentiment, due Friday.

Last week, Europe’s Stoxx 600 Index climbed 1.4 percent amid optimism Greece would still secure fresh aid. But by Sunday evening in Brussels, there was still no deal as talks continued, most recently between European Council President Donald Tusk, Greek Prime Minister Alexis Tsipras, German Chancellor Angela Merkel and French President Francois Hollande.

On the earnings front in Europe, SEB reports on Tuesday, Storebrand on Wednesday with Swedbank and Nordea Bank on Thursday.

BusinessDesk.co.nz

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