World Week Ahead: Eyes on US jobs, Greece

World Week Ahead: Eyes on US jobs, Greece

By Margreet Dietz

June 1 (BusinessDesk) - A flurry of US economic data including nonfarm payrolls will be scrutinised for help in trying to assess the timing of a Federal Reserve interest rate hike amid concern about the strength of an economy that contracted in the first quarter.

The latest official US jobs data will be released on Friday, two days after the ADP private employment report on Wednesday and weekly jobless claims on Thursday.

Wall Street’s three benchmark indices posted declines last week, shortened to four days by a public holiday on Monday; the Standard & Poor’s 500 Index slid 0.9 percent.

On Friday, the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite Index all fell 0.6 percent amid fresh reports that fuelled doubt as to the outlook for the US economy.

Commerce Department data on Friday showed gross domestic product contracted at a 0.7 percent annualised rate in the first three months of 2015, compared with a previously reported 0.2 percent increase. The official result was slightly better than forecast.

Separate reports showed Chicago-area manufacturing activity shrank in May to its lowest level since February, while consumer sentiment dropped the most in more than two years last month.

"There’s conflicting data on the strength of the economy,” Kevin Caron, a market strategist and portfolio manager who helps oversee US$170 billion at Stifel Nicolaus & Co in Florham Park, New Jersey, told Bloomberg.

Investors will also monitor a report on motor vehicle sales for May, due on Tuesday, amid high expectations.

"This is going to be one of the best months ever," David Kudla, chief investment strategist of Mainstay Capital Management in Grand Blanc, Michigan, told Reuters. Kudla forecast May sales of about US$40 billion, compared with the US$40.3 billion record in August 2014.

Other reports scheduled for release in the coming days include: personal income and outlays, PMI and ISM manufacturing indices, construction spending, due today; factory orders, due Tuesday; international trade, PMI services index, ISM non-manufacturing index, and the Fed's Beige Book, due Wednesday; productivity and costs, due Thursday; and consumer credit, due Friday.

Many analysts expect the Fed to raise rates in September, also reflected in last week’s strength in the US dollar. Speeches by Fed officials this week might offer fresh clues. Boston Fed President Eric Rosengren gives a talk today, Chicago Fed President Charles Evans, and St Louis Fed President James Bullard speak on Wednesday; and New York Fed President William Dudley will speak on Friday.

In Europe, the Stoxx 600 Index declined 1.9 percent last week.

Here, talks between Greece and its international creditors will remain at the forefront with a debt payment due on June 5, and subsequent larger payments due at the end of the month, and in July, needed to stave off default.

"We believe meeting the 1.6 billion euros in payments to the IMF by the end of June will be difficult. Payments of 3.5 billion euros on bonds held by the ECB on July 20 appear even more unlikely,” Michael Gapen, economist at Barclays, told Reuters. "Without an agreement, Greece could descend into what would effectively be an exit from the euro area, where defaults and capital controls become a permanent feature.”

European Central Bank policy makers gather this week, with President Mario Draghi speaking at the end of the meeting on Wednesday. Bank of England policy makers gather the next day.

And at the end of the week, ministers from the Organisation of Petroleum Exporting Countries will gather in Vienna for their annual meeting and during which they are expected to decide to hold steady their monthly production target. OPEC is battling to maintain its share of the global oil market. The strategy has had some success, with US shale oil and gas producers curbing exploration and output in the wake of falling prices.

(BusinessDesk)

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