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World Week Ahead: Interest rates in focus

Global markets continue to push higher on economic data and the week ahead should be no exception, though investors hope the data will bring further clarity on when the US Federal Reserve will begin to lift interest rates.

Friday's jobs report exceeded all expectations, as employers in the US added 321,000 jobs in November, while October's increase was an upwardly revised 243,000. The jobless rate was steady at a six-year low of 5.8 percent

Investors will eye today's speech by Atlanta Fed President Dennis Lockhart in Atlanta for clues on the timing of an interest rate increase. The next two-day Fed meeting starts on December 17.

The latest US economic data will arrive in the form of the NFIB small business optimism index and whole trade, due Tuesday; weekly jobless claims, retail sales, import and export prices, and business inventories, due Thursday; and the producer price index, and consumer sentiment, on Friday.

On Wall Street last week, the Dow Jones Industrial Average rose 0.73 percent, while the Standard & Poor's 500 Index gained 0.38 percent. The Nasdaq Composite Index slipped 0.23 percent. The Dow ended Friday on a record closing high of 17,958.79, while the S&P 500 finished on a record 2,075.37.

US Treasuries declined last week as the jobs data bolstered expectations that the Fed will lift rates sooner than later. The Treasury is set to auction US$59 billion in notes and bonds this week.

In Europe, the Stoxx 600 Index rallied 1.8 percent on Friday, advancing for the fourth straight week, bolstered by evidence of the US economy's strength.

Last Thursday European Central Bank President Mario Draghi disappointed investors when he failed to detail additional stimulus, postponing an assessment until early next year. This Thursday, investors will eye the results of the ECB's targeted long-term refinancing operations, aimed at lifting bank lending in the euro zone and stoking inflation.

"If the take-up is poor, that could increase market talk that the ECB is going to step in and use other tools," James Knightley, ING's senior economist, told Reuters.

Germany's DAX closed at a record high on Friday, after a report showed German factory orders increased more than expected.

Ahead are reports on German industrial production, and euro-zone Sentix investors confidence, due today; German trade balance, due Tuesday; German consumer price index, due Thursday; and euro-zone industrial production as well as employment.

Key economic data from China might also offer direction to investors this week, with reports on trade data and labour market conditions due today, followed by inflation on Wednesday, as well as retail sales and industrial production on Friday.

Oil might continue its slide, as investors failed to see value in prices at five-year lows and as Saudi Arabia seems determined to defend its share of the market. Global output has surged principally because of the shale boom in the US, which may slow slightly but is seen far from done.

"We're way oversold in both Brent and WTI, not to mention the products, and the market's not responding," Bob Yawger, director of the futures division at Mizuho Securities USA in New York, told Bloomberg News. "A market that ignores these bullish signals is heading much lower."

The slide in oil prices will prompt BP to announce hundreds of job cuts on Wednesday, according to a report in the Sunday Times on Sunday.

"Headcounts are coming down across all our activities in upstream, downstream and in the corporate centres" BP Chief Financial Officer Brian Gilvary told the Sunday Times.