World Week Ahead: Fed minutes, US jobs
Investors will scrutinise the minutes from the US Federal Reserve December policy meeting at which it promised patience in raising interest rates, released on Wednesday, as well as the latest US jobs data.
Other clues might come from several Fed officials who are scheduled to speak this week including San Francisco Fed President John Williams today, Chicago Fed President Charles Evans on Wednesday, Boston Fed President Eric Rosengren and Minneapolis Federal Reserve Bank President Narayana Kocherlakota on Thursday, and Richmond Fed President Jeffrey Lacker on Friday.
Eyes will also be on the latest US jobs data with the ADP employment report set for release on Wednesday, followed by weekly jobless claims on Thursday, and the government's employment data on Friday.
"The Fed understands that the economy is somewhat tenuous, and they're going to err on the side of being less restrictive for probably a longer period of time," Malcolm Polley, president and chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, told Bloomberg News.
"Expectations have been raised by some pretty decent jobs numbers in November and December, and now investors want to see some followthrough and strong economic prints going into 2015," according to Polley.
Other US data released in the coming days include motor vehicle sales, due today; PMI services index, ISM non-manufacturing index, and factory orders, due Tuesday; international trade, due Wednesday; and wholesale trade, due Friday.
On Wall Street last week-shortened by the New Year's day holiday, the Dow Jones Industrial Average fell 1.2 percent, while the Standard & Poor's 500 Index shed 1.5 percent, and the Nasdaq Composite Index dropped 1.7 percent.
The S&P 500 closed at a record high on December 29, before sliding the next three sessions, closing with a gain of 11 percent for all of 2014.
In Europe, the Stoxx 600 index posted a 4.4 percent increase last year. The UK's FTSE 100 Index slid 2.7 percent in 2014.
The euro sank to US$1.2002 on Friday, its lowest level in more than four years, after suffering its worst annual drop since 2005.
The euro weakened after comments made by European Central Bank President Mario Draghi in an interview with German newspaper Handelsblatt suggested the odds that the central bank will soon start quantitative easing had risen.
"The risk that we don't fulfill our mandate of price stability is higher than it was six months ago," Draghi told Handelsblatt. "We are in technical preparations to alter the size, speed and composition of our measures at the beginning of 2015, should this become necessary, to react to a too-long period of low inflation. There's unanimity in the ECB council on that."
Meanwhile, the German government believes a Greek exit from the euro zone would be "manageable" if needed, Der Spiegel news magazine reported on Saturday, citing unnamed government sources.
Both Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble believe the euro zone could cope with Greece leaving, Der Spiegel reported. Greece faces snap elections this month that might shift the power to the Syriza party, which wants to renegotiate the country's bailout from the European Union and the International Monetary Fund.
Oil may continue its descent this week. In a Bloomberg survey, 18 of 32 analysts and traders, or 56 per cent, predicted West Texas Intermediate crude futures may decrease through January 9 while eight respondents forecast prices will climb.
"This is a long-term cyclical downtrend," Walter Zimmerman, chief technical analyst at United-ICAP, told Reuters. "It's going to take a while for prices to fall low enough to cut off that excess production."
As a result of the slide in oil prices, energy sector earnings are seen down 19.6 percent in the fourth quarter, according to Thomson Reuters data; that compares with a consensus estimate for a 6.4 percent increase back in October.
Even so, it might be a good time to buy some of these stocks at a discount after recent declines.
"It won't surprise anyone to see profits fall, so if you have no exposure this is a good time to step in," Scott Wren, senior equity strategist at St Louis-based Wells Fargo Advisors, which has an "equal weight" rating on the sector, told Reuters. "The market is ready for bad news."