Asian shares are mixed on Monday and the U.S. dollar has come off its 7 month highs against a basket of currencies following Friday’s better than expected U.S. non-farm payroll report for October that increased the odds the U.S. Federal Reserve will raise interest rates at their next policy meeting in mid December.
The Federal Reserve still has a November jobs report in early December to examine before deciding if the economy is strong enough to absorb what is expected to be a gradual rate hike on the horizon, which would mark the first rate hike since 2006, as investors prepare their 2016 outlook with 2 major headwinds: a strong U.S. currency that just touched a 7 month high and a Chinese economy that is showing continual signs of slowing.
Latest economic data from China over the week-end showed that Chinese exports dropped in October for the fourth consecutive month.
Chinese exports fell 6.9 percent in October and Chinese imports tumbled 18.8 percent, China’s General Administration of Customs reported.
Fed Reserve Chair Janet Yellen and Fed officials have grown increasingly concerned about global headwinds from a slowdown in China.
Some of the other economic concerns that Fed officials cited in recent Fed meetings was a strong U.S. dollar combined with low oil prices that acts to push down inflation expectations and challenges U.S. corporations’ earnings with international exposure.
John Williams, CEO and President of Federal Reserve Bank of San Francisco, said in a week-end speech from Tempe, Arizona that he is confident that U.S. inflation will gradually return to the Fed’s 2 percent inflation target, a level that hasn’t occurred for three and a half years.
“My forecast is that we’ll reach our maximum employment mandate in the near future and I’m increasingly confident that inflation will gradually move back to our 2 percent goal. It makes sense, therefore, to start gradually moving away from the extraordinary stimulus that got us here” Williams said.
“We already took a step in that direction when we ended QE3. Given the progress we continue to make on our goals, I view the next appropriate step as the start of a process of gradually raising interest rates. That’s the ‘how’; as I said, the data will determine the ‘when’ ” Williams added.
In November holiday hiring will be getting underway across retail stores and the surge in hiring is expected to provide a boost to payroll hiring which has the potential to impact the November jobs report, released in early December.
U.S. retail sales will come into greater focus later in the week as a host of retailers including Macy’s, Nordstrom’s, and Kohl’s report quarterly earnings followed by the retails sales report for October that will be reported on Friday.
Overall, this week won’t see nearly as much economic data reported compared to the past 2 weeks.
Inflation in October as measured by PPI and Core PPI will be reported on Friday.
Economists from briefing.com are forecasting a 0.1 percent increase for PPI and 0.2 percent for Core PPI.
Full Economic Calendar
Tuesday- Export/Import Prices for October, Wholesale Inventories (Sept)
Thursday-Treasury Budget (October), MBA Mortgage Housing Index, Initial and Continuing Jobless Claims, JOLTS Jobs Openings (Sept.), Crude Inventories (11/07)
Friday- Retail Sales (October), PPI, Core PPI, Michigan Sentiment (NOV), Business Inventories (SEPT), Natural Gas Inventories (11/7)