World Week Ahead: Eyes on Fed, Greece
By Margreet Dietz
Jan. 26 (BusinessDesk) - US Federal Reserve policy makers begin a two-day meeting on Tuesday and investors will be
looking for any clues on the timing of an interest rate increase even as central banks elsewhere seek to bolster the
growth outlook.
Last week the Bank of Canada unexpectedly cut its benchmark interest rate because of the slump in oil prices, while the
European Central Bank announced a monthly asset purchase plan that exceeded expectations.
Despite uncertainty in Europe in particular, US policy makers will gather as the American economy continues to show
signs of accelerating growth.
"Global central policy is not one of their mandates, but I think they have to acknowledge it, because this is not just
global economic headwinds, this is actually the moves of other central banks," Erik Davidson, chief investment officer
for Well Fargo Private Bank in San Francisco, told Reuters. “They've got to take that into account.”
All central bank efforts at combating deflation have bolstered the appeal of fixed-income securities. Last week, yields
on US 30-year government bonds dropped eight basis points to 2.38 percent. The US is scheduled to sell US$26 billion of
two-year notes on Tuesday, US$35 billion of five-year notes on Wednesday and US$29 billion of seven-year debt on
Thursday.
“Everything seems to be bullish for Treasuries,” David Ader, head of US government-bond strategy at CRT Capital Group in
Stamford, Connecticut, told Bloomberg News.
Apple, Microsoft, Google and Facebook are among the US companies poised to release their latest quarterly results in the
coming days.
With 18 percent of S 500 companies having reported, 72.2 percent have topped earnings expectations, while 54.4 percent have beaten revenue
forecasts, according to Thomson Reuters data.
On Friday, shares of Starbucks jumped 6.6 percent on the company’s quarterly results.
Among the disappointments, however, was UPS. On Friday, shares of UPS plunged 9.9 percent after the company said
preliminary 2014 earnings were lower than previously estimated because of higher-than-expected costs to deal with the
holiday rush that never came.
"Clearly, our financial performance during the quarter was disappointing," David Abney, UPS chief executive officer,
said in a statement. "UPS invested heavily to ensure we would provide excellent service during peak when deliveries more
than double. Though customers enjoyed high quality service, it came at a cost to UPS. Going forward, we will reduce
operating costs and implement new pricing strategies during peak season."
Last week — shortened by the public holiday on Monday, Wall Street advanced, with the Standard & Poor’s 500 Index climbing 1.6 percent. That decreased the decline so far in 2015: the S 500 has slipped 0.3 percent, while the Dow Jones Industrial Average has lost 0.7 percent. The Nasdaq Composite Index
has gained 0.5 percent so far this year.
The latest US economic data will arrive in the form of reports on PMI services and the Dallas Fed manufacturing survey,
due today; durable goods orders, S Case-Shiller home price index, new home sales, consumer confidence, and the Richmond Fed manufacturing index, due
Tuesday; weekly jobless claims, and the pending home sales index, due Thursday; and gross domestic product, employment
cost index, Chicago PMI, and consumer sentiment, due Friday.
In Europe, the Stoxx 600 Index soared 5.1 percent for the week, bolstered by the European Central Bank’s plans to buy 60
billion euros worth of assets, both public and private, per month, from March and until at least the end of September
2016.
“The strong commitment from [ECB President Mario] Draghi to wipe out fears about the euro zone’s sustainability is good
news,” Pierre Mouton, who helps oversee US$8 billion at Notz, Stucki & Cie in Geneva, told Bloomberg News. “The simple fact that the ECB has given a time frame and the size of its QE is very
helpful. Investors know they’ll be helped by the ECB for the next 18 months at least.”
Today, euro-zone finance ministers will gather in Brussels to discuss the outcome of Greece’s elections and the
country’s bailout package.
(BusinessDesk)