Scoreboard: Fed focus

All eyes will be on the US Federal Reserve this week as investors look for any sign of an imminent rate rise, while tensions in Iraq push the oil price higher.

Markets were reasonably quiet on Friday night, a few swings here and there, but broadly speaking it was comparatively quiet. Tensions in Iraq are obviously a causal factor in the regard. Another factor, of course, is the Fed meeting this week and investors are waiting to see what we get out of that. The expectation is that the Fed will taper again, another $US10 billion, but there is a good probability it will revise down its growth outlook as well. The rhetoric is going to be fascinating following recent ECB decisions and also posturing by the Bank of England.

That aside, some positive corporate news did help push Wall Street modestly higher. Intel, for instance, had a decent session (strongest gain in three years) following an upgrade to its sales forecasts. There was also some action in the M&A space -- Sycamore Partners announced a plan to buy Express Inc.

Equities were mixed on Friday’s session, with Wall Street generally outperforming European markets. At the bell, the S&P 500 was up 0.3 per cent (1936) and the Dow was 41 points (16775) higher. The Nasdaq was 0.3 per cent higher (4310). By sector, energy and telecommunications look to have been the key outperformer. Over in Europe, the major indexes fell -- Dax was down 0.3 per cent, the CaC fell 0.2 per cent and the FTSE 100 was off 0.98 per cent.

Forex. The euro weakened down about 35 pips to $US1.3535, the British pound held broadly steady at $US1.6973, while the Australian dollar weakened a touch, maybe 20 pips to $US0.9394. The Japanese yen is at 102.06.

Rates eased a little overnight, the US 10-year yield down about 3bp to 2.596 per cent. The 5-year was down about 1bp to 1.681 per cent, while the 2-year is at 0.431 per cent. Aussie futures were flat on the 3s 97.16 and up 2 ticks on the 10s (96.24).

Commodities generally pushed higher though moves were small. In the crude space, both WTI and Brent received a modest bid on the back of ongoing tensions in Iraq -- WTI ($106.9) was up 0.4 per cent and Brent rose 0.3 per cent ($112.5).

Elsewhere, data wasn’t particularly hard hitting. In Europe, German consumer prices were confirmed as falling 0.1 per cent in May, to be 0.9 per cent higher annually. Eurozone employment was then 0.1 per cent higher for the March quarter, while the trade balance came in at €15.8bn in April, little changed from March. In the US, producer prices fell 0.1 per cent in May, following a 0.5 per cent gain the month prior. Annually, producer prices are 2 per cent higher.

Markets this week. The SPI suggests Aussie stocks will be flat today. Data-wise, there isn’t much for our session today and the key data tonight includes eurozone inflation figures, the Empire State manufacturing survey in the US, alongside industrial production and capital flows. For the rest of the week, the key focus for the market will be the Fed’s meeting -- decision Thursday morning 4am (AEST). The taper is expected to continue at this meeting, another $10bn lopped off and that won’t be controversial. The rhetoric of the accompanying statements and forecasts will be the key focus. There are a few bits and pieces of interesting aside from that. For the US this includes consumer prices and housing starts on Tuesday night, then on Thursday night we see jobless claims and the Philly Fed index.

In Europe, the German ZEW survey on Tuesday night is worth watching with construction output figures (for the eurozone) on Wednesday night. Not a lot outside of that, Chinese property prices on Wednesday at 11.30am (AEST). For Australia data is equally light -- car sales at 11.30am (AEST) on Tuesday with the RBA’s minutes released at the same time.

Have a great day.