World Week Ahead: Bulls holding fast

Monday 22 May 2017 08:25 AM

World Week Ahead: Bulls holding fast

By Margreet Dietz

May 22 (BusinessDesk) - The global equities bull market remains intact, despite the latest political woes for US President Donald Trump and the increasingly clouded outlook for his pro-growth agenda.

Stocks appear set to begin the week with a boost from oil and a further retreat in the US dollar.

Saudi Arabia's energy minister said on Saturday oil producers within OPEC and several outside including Russia agreed to extend crude output cuts by nine months to help trim a supply glut, Bloomberg reported.

"We think we have everybody on board," Khalid al-Falih said in an interview with Bloomberg in Riyadh. "Everybody I've talked to indicated that nine months was a wise decision."

His comments come before Thursday’s meeting of OPEC and its partners in Vienna to discuss an extension of their current six-month output cut agreement, which is set to expire next month.

The price of oil is likely to receive an added boost from a decline in the US dollar.

"Oil is priced in the dollar, so a weaker dollar is a price cut to consumers around the world," Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, told Bloomberg. "It looks like the dollar has a lot lower to go. This will continue to be supportive for oil, a lot more than anything OPEC accomplishes next week.”

Some stocks will also benefit from a weaker greenback.

"A weaker dollar is arguably good for any company that sells overseas," lan Gayle, director of asset allocation at RidgeWorth Investments in Atlanta, told Reuters. "If you’re talking about a silver lining, if you are a large-cap company that has significant overseas sales exposure, then this is an emerging positive."

Last week, the Dow Jones Industrial Average declined 0.4 percent, while the Standard & Poor’s 500 Index also fell 0.4 percent, and the Nasdaq Composite Index dropped 0.6 percent.

The Federal Reserve will release the minutes of its last meeting on Wednesday, which will be closely eyed for any clues on the pace and timing of further interest rate increases.

Among Fed officials set to speak this week are Neel Kashkari, Patrick Harker, Lael Brainard, and Charles Evans today, Robert Kaplan and James Bullard on Thursday, as well as John Williams on Sunday.

The latest economic data will show up in the form of reports on the Chicago Fed national activity index, due today; new home sales, and the Richmond Fed manufacturing index, due Tuesday; FHFA house price index, PMI composite, and existing home sales, due Wednesday; international trade in goods, weekly jobless claims, and Kansas City Fed manufacturing index, due Thursday; and durable goods orders, GDP, and consumer sentiment, due Friday.

Meanwhile, shares of Deere soared 7.3 percent to close at a record high on Friday after the world’s top maker of agricultural machinery posted better-than-expected quarterly results and upgraded its full-year outlook.

Net income attributable to Deere climbed to US$802.4 million, or US$2.49 per share, for the second quarter ended April 30, from US$495.4 million, or US$1.56 per share, for the year-earlier period.

Worldwide net sales and revenues increased 5 percent, to US$8.3 billion for the second quarter.

“John Deere reported strong results in the second quarter as market conditions showed signs of further stabilisation," Samuel Allen, chief executive officer, said in a statement.

In Europe the Stoxx 600 Index rose 0.6 percent on Friday, easing its weekly drop to 1 percent.

The latest economic reports due this week include euro-zone manufacturing and services PMIs, as well as Germany's GDP and IFO business climate, due Tuesday; and German GfK consumer sentiment, due Wednesday.

European Central Bank President Mario Draghi is set to speak on Wednesday.

(BusinessDesk)

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