What happened last week?
The most important development last week was the weak macroeconomic data that disappointed expectations. Non-farm payrolls rose by 156,000 in September, against an expectation of 172,000, according to the Department of Labor last Friday. The unemployment rate increased to 5 percent, despite the market consensus of remaining steady at 4.9 percent, the department said.
Both data are being watched closely by the Federal Reserve to assess the well-being of the U.S. economy and to increase its benchmark interest rate this year.
However, some Fed officials were confident that the economy was on track for a full recovery, and the data, which came in below expectations, was still strong enough to make a rate hike before the end of this year.
Cleveland Fed President Loretta Mester said last Friday after the announcement of the data that it is a “solid labor market report” and added, “It is very consistent with what we expected to see.”
She underlined that the U.S. economy has been “very resilient” and said, “It makes sense to move up the rate another 25 basis points.”
Fed Vice Chairman Stanley Fischer also said on Sunday that the economy is running close to full employment.
He emphasized that gradual increases in the Fed’s federal funds rate “will likely be sufficient to get monetary policy to a neutral stance over the next few years.”
Another important development last week was the increase in oil prices. Since OPEC announced its plan to limit its monthly oil production quota to 32.5 to 33 million barrels per day the previous week in Algeria, prices kept climbing to reach their highest level in the last four months.
Prices gained even more when the U.S. Energy Information Administration announced last Wednesday that the weekly crude oil inventories dropped in the country, when market consensus was an increase.
Oil prices kept on climbing to their highest level in a year when Russian President Vladimir Putin said on Monday at the 23rd World Energy Congress in Istanbul that Russia supports OPEC’s decision to limit its production quota. As a result, Brent crude reached $53.73 a barrel on Monday, while American benchmark West Texas Intermediate climbed to $51.59 per barrel.
What to expect from this week?
This week, investors in the oil market will continue to focus on statements from OPEC members.
OPEC Secretary General Mohammed Barkindo said on Monday that member countries’ officials will hold a meeting in Istanbul on Wednesday at 14:00 Turkish local time to further discuss the cartel’s plan to limit output.
On the U.S. side, investors and the market will closely watch incoming macroeconomic data to assess the well-being of the economy, the Fed’s approach to the data, and statements from the Fed officials.
New York Fed Vice President William Dudley and Kansas City Fed President Esther George will make speeches on Wednesday, while Boston Fed President Eric Rosengren will talk on Friday.
Also on Friday, retail sales for the month of September will be announced. Retail sales are expected to increase by 0.6 percent, while they decreased by 0.3 percent during the previous month.
In addition on Friday, producers’ and consumers’ price indexes will be revealed.
If the indexes come in line with market expectations or above, the Fed’s likelihood of increasing its benchmark interest rate by 25 basis points would increase, analysts say.