U.S. letter, week beginning June 13
What happened last week?
Last week, the Federal Reserve Chair Janet Yellen was at the center of the markets’ attention.
Yellen reaffirmed her view that gradual future rate hikes remain appropriate in her last remarks before Federal Open Market Committee (FOMC's) June meeting, saying positive economic forces outweigh the negative trends.
She stated that the last employment report, with a six year low of only 38K job gains, was “concerning” and “disappointing,” but she also downplayed its importance by saying no one should attach too much significance to any single monthly report.
More importantly, she was vague on the timing of the next rate hike and refrained from giving a certain timeframe, a step down from her May 27 remarks where she said that a rate hike would be appropriate “in the coming months.”
She also highlighted that the recent labor market data raises new questions about the economic outlook. "Is the markedly reduced pace of hiring in April and May a harbinger of a persistent slowdown in the broader economy? Or will monthly payroll gains move up toward the solid pace they maintained earlier this year and in 2015? Does the latest reading on the unemployment rate indicate that we are essentially back to full employment, or does relatively subdued wage growth signal that more slack remains? My colleagues and I will be wrestling with these and other related questions going forward," she concluded.
- World Bank lowered growth expectations
The World Bank downgraded its 2016 global growth forecast to 2.4 percent from the 2.9 percent projected in January.
The downward revision reflected weakening growth in commodity exporters due to stubbornly low commodity prices, sluggish growth in advanced economies, subdued global trade and diminishing capital flows, according to the World Bank Global Economic Projections report.
About half of the global downgrade was due to a 0.5 percentage point cut in the outlook for advanced economies, which are now expected to grow 1.7 percent this year, down from 2.2 percent estimated in January.
The World Bank now expects U.S. growth to slow down to 1.9 percent this year, down from 2.4 percent in 2015.
- This week
This week all eyes will be on the Fed's policy meeting.
Due to weakness in the May employment report, no rate hike is expected from the meeting. However, FOMC participants’ assessments of appropriate monetary policy will be critical for the timing and pace of future rate hikes.
The members will also update their expectations about inflation, unemployment rate and growth.
Fed Chair Yellen will hold a press conference where she will answer questions about the meeting’s decision and the path ahead for monetary policy.
Furthermore, important data releases such as retail sales, industrial production and consumer price index are among investors’ watch-listed events.
- Microsoft to buy LinkedIn for 26.2B
Microsoft announced Monday that it will buy professional social network service firm LinkedIn for $26.2 billion.
Microsoft will pay $196 per share and the social network firm will retain its "distinct brand, culture and independence," according to a statement by Microsoft.
LinkedIn's stock soared nearly 48 percent, from $131 to $194 per share, after the opening bell at the U.S. stock market. Meanwhile, Microsoft lost around 3.3 percent.