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World Week Ahead: Fed minutes, Trump rally

Monday 20th February 2017

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As Wall Street continues to scale fresh record highs, investors will eye minutes of the latest Federal Open Market Committee meeting for more insight on the probability of an interest rate increase at the March meeting. 

Minutes of the latest policy-maker gathering are scheduled to be released on Wednesday. Fed chair Janet Yellen, in her semi-annual testimony to Congress last week, warned that the central bank shouldn’t wait too long before raising rates.

Yellen specifically put March on the table whereas markets previously were pricing in June as the most likely month for the next hike.

Fed officials scheduled to speak in the coming days include Neel Kashkari, Patrick Harker and John Williams on Tuesday, Jerome Powell on Wednesday, as well as Dennis Lockhart on Thursday.

US markets are closed today for the Presidents Day holiday.

Investors will also scrutinise the latest corporate earnings, with a slew of US retailers including Home Depot, Macy’s, Nordstrom, Wal-Mart, Target and Best Buy set to report this week.

The latest US economic data will arrive in the form of reports on the PMI manufacturing index, due Tuesday; existing home sales, due Wednesday; weekly jobless claims, Chicago Fed national activity index, FHFA house price index, and PMI services, due Thursday; new home sales, and consumer sentiment, due Friday. 

President Donald Trump’s promises on taxes, of which details are yet to be unveiled, helped sustain Wall Street’s inching higher to record highs last week. On Friday the Dow Jones Industrial Average, the Standard & Poor’s 500 Index and the Nasdaq Composite Index touched record highs once again. 

US Treasuries also rose on Friday. The yield on the 10-year note yield fell four basis points to 2.42 percent. 

For the week the Dow added 1.8 percent, while the S&P 500 increased 1.5 percent and the Nasdaq gained 1.8 percent.

“Corporate earnings are fine, the economy's fine, the Fed's going to raise rates, and that's great for financials,” John Canally, chief economic strategist for LPL Financial, told Reuters.

Underpinning stocks on both sides of the Atlantic was fresh deal news. Kraft Heinz on Friday said it will continue to pursue a deal with Unilever after the Anglo-Dutch company rejected its initial US$143 billion takeover offer.

Unilever rejected the US$50 a share offer, saying it “fundamentally undervalues” the company.

Shares of Kraft Heinz jumped 10.6 percent in New York, while those of Unilever soared 13.4 percent in London. 

"We believe Kraft will likely need to raise its offer substantially if it hopes to change the outcome," RBC Capital Markets analyst David Palmer said in a research note, Reuters reported.

British Prime Minister Theresa May has ordered her top officials to examine Kraft Heinz’s proposed takeover of Unilever to see if it raises concerns for the wider British economy and merits government intervention, the Financial Times reported on Sunday. May has called for more powers to block predatory takeovers of key companies.

On Friday Europe’s Stoxx 600 Index inched higher to brings its gains for the week to 0.8 percent.

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