Markets Diary

Posted on August 14, 2016

Pedestrians pass the New York Stock Exchange (NYSE) in New York, U.S., on Friday, June 3, 2016. U.S. stocks fell with the dollar, while Treasuries and gold rallied after American employers added the fewest jobs in almost six years in May, bolstering the case for the Federal Reserve to leave interests rates lower for longer. Photographer: Michael Nagle/Bloomberg©Bloomberg

US equity markets touched fresh record highs propelled by oil prices and a rally in shares of department stores last week.

But that rally lost wind on Friday following disappointing results. This week, investors take their cue from the minutes of the Federal Reserve’s July monetary policy meeting that could help revive or curb risk appetite.

    Data released on Monday are expected to show that economic growth in Japan cooled in the second quarter. Economists project growth slowed to 0.2 per cent from the first quarter, when the economy grew 0.5 per cent.

    Slowing growth prompted Japanese prime minister Shinzo Abe to launch a new ¥4.6tn ($45bn) stimulus package to help revive growth. And the Bank of Japan had already cut rates to negative territory earlier this year.

    On Wednesday investors will tune in to see whether the minutes of the Federal Reserve’s July monetary policy meeting will strike a more hawkish tone than the statement or if they will be dovish.

    In their July statement, policymakers at the Fed had noted that “near term risks to the economic outlook have diminished”. Now investors will watch discussion on “the balance of risks” and slack in the labour market as they try and determine the timing of the next interest rate rise by the Fed.

    “Overall, we think the minutes will sound slightly more hawkish than the statement as Fed officials emphasise that downside risks have abated and that the US data have generally been supportive of continued growth in the economy,” economists at Bank of America, said.

    But not everyone agrees. James Rossiter at TD Securities expects the minutes will strike a more dovish tone as the Fed continues to be in a wait-and-see mode.

    Investors will also pay attention as a string of Fed speakers including, St Louis Fed president James Bullard and Atlanta Fed President Dennis Lockhart deliver speeches next week.

    And following disappointing retail sales and producer price data, the consumer price report comes into focus next week as the Fed continues to watch for signs of inflation as it determines when to raise rate interest rates.

    While earnings season in the US has begun to wind down, Walmart, the world’s largest retailer by sales is expected to report results next week.

    The retailer, which recently announced its $3.3bn acquisition of Jet.com as its seeks to compete against ecommerce giant Amazon, is expected to report second-quarter earnings of $1.02 a share, on sales of $120.3bn. That compares with earnings of $1.08 a share, on sales of $120.2bn in the year ago quarter.

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