Week Ahead: Focus Shifts to Trade, Federal Reserve, and UK

Last week, the markets ended at a high note as investors cheered the impressive jobs report and he assuring message from the Fed chair. The Dow gained by 746 points while the S&P gained by 85 points. The positive jobs numbers continue to show that the US economy is accelerating its growth. This was seen mostly in the wage growth numbers that showed an increase by 3.2%. Investors also cheered the restart in US and China talks on trade that are scheduled to start this week. This week, investors will pay close attention to the following.

First, they will focus on the US and China talks. Already, US officials have arrived in Beijing for these talks, which come a month after Donald Trump talked with Xi Jinping. In recent weeks, China has shown that it is taking the talks seriously. For example, it has announced that it will lower tariffs on key US goods such as automobiles. It has also announced that it will start enforcing measures against forced technology transfers. All these will be important as the two countries restart the negotiations. With the two presidents increasingly under pressure, there is a likelihood that the talks will yield better results this time.

Second, they will focus on the Federal Reserve. The Fed will release a statement on the previous meeting. The minutes will show the deliberations that took place in the final meeting of the year. This meeting led to a rate increase and a guidance for two more hikes this year. What is not known is the reservations that were in the meeting and what the officials said about the economy. Other than this, investors will listen to the Fed chair who will address a gathering of the World Economic Forum (WEF).

Third, they will continue to focus on crude oil. At the end of the year, the price of crude oil dropped to multi-year lows. As the year starts, the price has continued moving up as OPEC begins to slash output. This week, investors will continue to focus on the price as it goes up. They also expect a
presidential tweet from Donald Trump who could target his ally Saudi Arabia for reducing output.

Fourth, they will pay close attention to the United Kingdom as the country’s parliamentarians start debating Theresa May’s proposals. Her proposal will likely not have any support in the parliament. Therefore, traders will want to know the way forward even as the March deadline nears. On the economic calendar, they will listen to Marc Carney and receive important data such as retail sales, manufacturing and industrial production, GDP, and trade.

Finally, they will focus on key data from around the world. The most important of this data will be: ISM manufacturing PMI, JOLTS job openings, Bank of Canada interest rates decision, ECB minutes, and US inflation numbers.

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