Yellen, NFP & weeks ahead
This week Janet Yellen started her term as the Federal Reserve’s Chairwoman. However, the market’s sentiment didn’t get a positive boost as she took office on Monday – the greenback depreciated and S&P 500 fell by 2.3%. Stocks are hurt as the Fed is believed to keep tapering monetary stimulus.
ISM PMI fell from 56.0 to 51.3 and traders were really surprised that US manufacturing activity expand at its slowest pace since May. According to the officials, data worsened because of bad weather conditions. This situation may repeat in February. This week we are approaching NFP (Non-Farm Payrolls) report for January. After the disappointing December reading investors will be watching the release with great attention. Note though, that there will be no FOMC meeting this month, so the central bank will have both January and February NFP readings while deciding its further move. The unemployment rate is close to the threshold of 6.5%. We should hear soon that reaching of this level won’t trigger a rate hike.
All in all, American data remains mixed. This week there will be also some speeches of the Fed’s officials (see the economic calendar). As Credit Agricole points out, a combination of tapering, country-specific emerging market concerns and weaker growth in China provide the backdrop for a volatile few weeks, if not longer, ahead.