World Week Ahead: Eyes on Fed, Greece
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&P 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&P 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&P 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)