World Week Ahead: US rate outlook rethink
By Margreet Dietz
June 19 (BusinessDesk) – A host of US Federal Reserve policy makers set to speak in the coming days will be closely
watched for fresh hints about the pace and timing of interest rate hikes as some investors questioned the latest
increase.
The Federal Open Market Committee announced a rate increase last week, as had been widely anticipated, and suggested it
remains on target for a third lift this year. However, some weak data including on inflation has prompted some concern.
Last Friday, the University of Michigan said its preliminary June reading of US consumer sentiment fell to 94.5, down
from 97.1 in May and the lowest level since November.
“The recent erosion of confidence was due to more negative perceptions of the proposed economic policies among Democrats
and the reduced likelihood of passage of these policies among Republicans,” Richard Curtin, director of the University
of Michigan consumer survey, said in a statement.
“Fortunately, a strong job market, improved household income and wealth have provided a financial buffer against rising
uncertainties,” Curtin noted. “Nonetheless, consumers have become less optimistic about the future course of the
domestic economy.”
Fed officials speaking this week include William Dudley and Charles Evans today, followed by Stanley Fischer, Eric
Rosengren and Robert Kaplan on Tuesday, as well as James Bullard, Loretta Mester and Jerome Powell on Friday.
“The data [last] week has not been encouraging,” Mariann Montagne, a portfolio manager at Gradient Investments, told
Bloomberg. “We need to see consumer spending pick up and more confidence across the board before we can get going again.
We’re in a weird limbo, coupled with the summer doldrums. But if we had great numbers coming out, there would be
decisions made.”
The latest US economic data will include reports on the current account, due Tuesday; existing home sales on Wednesday;
weekly jobless claims, FHFA house price index, leading indicators, and Kansas City Fed manufacturing index, due
Thursday; PMI composite, and new home sales, due Friday.
For the week, the Dow Jones Industrial Average rose 0.5 percent while the Standard & Poor’s 500 Index eked out a 0.1 percent gain. However, the Nasdaq Composite Index retreated 0.9 percent.
Even so, the Dow rose 0.1 percent to close at a record high on Friday, led by a rally in energy stocks. Chevron climbed
1.9 percent, while Exxon Mobil ended the day with a 1.6 percent gain.
Shares of Wal-Mart, however, slid 4.7 percent on Friday, posting the largest percentage drop in the Dow.
Retailers dropped after Amazon said it agreed to buy Whole Foods Market in a deal valued at about US$13.7 billion in a
move that signals the increased potential for a price war. Shares of Supervalu plunged 14.4 percent, while those of
Kroger sank 9.2 percent. Shares of Costco slid 7.2 percent, while those of Target sank 5.1 percent.
“This is a game changer,” Zachary Fadem, an analyst at Wells Fargo & Co, told Bloomberg. “It’s a warning shot for the food retail industry that competition likely heightens on top of an
already challenging backdrop.”
Whole Foods shares closed 29.1 percent higher at U$42.68 on Friday, above the US$42 a share Amazon agreed to pay, while
shares of Amazon climbed 2.4 percent.
“The ramifications for all of retail are seismic — not just retailers that sell grocery, but for everyone,” Gordon
Haskett analyst Chuck Grom told Reuters.
Investors will also eye the start of talks about the UK’s exit from the European Union, scheduled to begin today.
Europe’s Stoxx 600 Index climbed 0.7 percent last Friday, narrowing its decline for the week to 0.5 percent. Retailers
including Tesco slumped.
The latest regional economic reports slated for release this week include Germany's producer price index and eurozone
current account, due Tuesday; eurozone consumer confidence, due Thursday; as well as eurozone manufacturing and services
PMIs, due Friday.
(BusinessDesk)
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