World Week Ahead: More Fed speak

Monday 20th March 2017

A slew of US Federal Reserve officials including chair Janet Yellen are set to speak in the coming days, with investors eyeing whether the US central bank has indeed shifted to a dovish stance.

Last week the Fed lifted its key interest rate but kept steady its projected pace of two additional hikes this year.

Yellen is set to give the opening keynote address at the Federal Reserve System Community Development Research Conference on Thursday in Washington.

Other Fed officials scheduled to speak this week include Charles Evans today, Esther George, Loretta Mester and Eric Rosengren on Tuesday, Neel Kashkari and Robert Kaplan on Thursday, as well as Evans, James Bullard, and John Williams on Friday.

Last week, the Dow Jones Industrial Average squeezed out a gain of almost 0.1 percent, the Standard & Poor’s 500 Index rose 0.2 percent, and the Nasdaq Composite Index climbed 0.7 percent.

“The Fed can lift rates and it is far from being bad news for equities,” Tobias Levkovich, managing director and head of US equity strategy at Citigroup Global Markets, wrote in a note to clients Friday, Bloomberg reported. “Yet, higher rates could be an issue for some equity areas, particularly growth stocks and small caps.”

Valuations on small-caps are deemed high.

"Growth and the interest rate trajectory are going to be two key factors,” Dan Suzuki, senior US equity strategist at Bank of America Merrill Lynch in New York, told Reuters.

Small caps may have more room to gain in the short run, especially if earnings surprise to the upside, but valuations remain a negative, Suzuki noted.

Investors will eye a vote on the Republican health care bill, alternatively tagged Ryancare or Trumpcare, in the House on Thursday to gauge the potential pace of progress on tax reform.

"Washington has been such an important driver of the rally since the election, so every week is important in terms of what is new on health care and what's new on tax reform," Peter Boockvar, chief market analyst at The Lindsey Group, told CNBC.

The latest data on the US economy will arrive in the form of reports on the Chicago Fed national activity index, due today; FHFA house price index, and existing home sales, due Wednesday; weekly jobless claims, and new home sales, due Thursday; durable goods orders, and composite PMI, due Friday.

In Europe, the Stoxx 600 Index rose Friday to bring its gain for the week to 1.4 percent.

The region’s economic reports slated for release this week include Germany’s producer price index, due today; the UK's consumer price index, due Tuesday; euro-zone current account, due Wednesday; Germany's GfK consumer confidence, UK retail sales, and euro-zone consumer confidence, due Thursday; and euro-zone manufacturing and services PMIs, due Friday.

Meanwhile, the US prevailed at the latest meeting of Group of 20 finance chiefs in Germany over the weekend, in opening the door for the Trump administration to enact more protectionist trade policy as part of Trump’s America First platform.

BusinessDesk.co.nz

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