What to Watch in the Week Ahead and on Monday, June 2

Fri May 30, 2014 2:45pm EDT

(The Day Ahead is an email and PDF publication that includes the day's major stories and events, analyses and other features. To receive The Day Ahead, Eikon users can register at . Thomson One users can register at RT/DAY/US. All times in ET/GMT) WEEK AHEAD Much focus next week will be on the bond market, as long-dated yields have dropped to 10-month lows on foreign buying, short covering and other technical factors, but next week's data will clarify the economy's current direction and could pose a challenge for the bond market's rally. Factory-sector data, car sales, labor costs and the Friday payroll report could suggest that this week's figures on wage inflation aren't a fluke, and that salaries are growing. Markets could also be affected by the coming European Central Bank meeting, depending on whether they meet expectations or not. The equity market could maintain its recent gains and is likely to trade in a range prior to the jobs figures. A heavy calendar of data, including the monthly U.S. jobs report on Friday, will provide plenty of fodder for investors to fine-tune their expectations for the economy and Fed policy. Non-farm employment likely rose by a respectable 215,000 in May after climbing in April at the fastest pace in more than two years. If it comes in as expected, the data would suggest the economy continues to gain traction after its winter swoon. The jobless rate is expected to rise a tenth of a percentage point to 6.4 percent, but only because Americans are seen re-entering the workforce after a surprisingly sharp decline in labor force participation in May. ADP's report on private-sector hiring on Wednesday might help economists fine-tune their expectations. An ISM report on Wednesday is likely to show the services side of the economy expanding at a healthy rate as well. Two regional Federal Reserve bank presidents will air their latest views about economic conditions and monetary policy during the week. Kansas City Fed President Esther George will discuss monetary policy with business and community leaders in Colorado at a lunch speech in Breckenridge. Minneapolis Fed President Narayana Kocherlakota discusses the impact of low real interest rates at a Boston College finance conference. Discount chain Dollar General is scheduled to report first-quarter results before the bell on Tuesday amid expectations of a turnaround as consumer spending improves in the United States. Investors will look for details on sales of its tobacco products, which the company started carrying in mid-2013. They will also look for commentary on the company's forecast for the year and a possible upward revision. VeriFone Systems is expected to report second-quarter profit above analysts' estimates on Thursday, according to StarMine data, helped by its restructuring and cost-cutting efforts. The company, which makes credit card swipe machines, is also likely to benefit from the ongoing EMV chip upgradation of payment cards in the United States in the wake of several data breaches at U.S. retailers, including one at Target Corp. Truck and engine maker Navistar is likely to be hit by lower truck sales in its core North American market. The company, scheduled to report second-quarter results before the bell on Wednesday, is still trying to recover from a disastrous engine redesign in 2012 that failed to meet regulatory standards and forced the company to source engines from rival Cummins. Investors will be looking for an update on when the company is likely to stop sourcing engines from Cummins altogether. Logistic company UTi Worldwide, expected to report first-quarter results on Thursday, is likely to take a hit from costs associated with the implementation of its new freight forwarding operating system. But a modest increase in air freight volume, particularly in North America, is expected to offset some of the costs. Investors will be interested in knowing about the company's plan for 2014 and details on the pricing environment. Cisco rival Arista Networks' IPO on Friday is expected to raise as much as $210 million by offering 5.25 million shares at $36-$40 each. Arista builds switches that handle traffic at large internet data centers for companies including Facebook, Yahoo, Comcast and Citigroup. At the top end of its expected price range, Arista would be valued at about $2.5 billion. Mexico's consumer confidence data for May on Thursday will help gauge if domestic demand is building up after sentiment rose to a four-month high in April. The central bank is expected to hold its benchmark interest rate at a record low of 3.5 percent on Friday to support the rocky economic recovery from last year's slowdown. MONDAY, JUNE 2 Chicago Fed President Charles Evans travels to Turkey to deliver remarks on current economic conditions and monetary policy to the Istanbul School of Central Banking. (0300/0700) The Institute for Supply Management releases a report that is expected to show factories powered ahead in May. (1000/1400) The RBC Canadian Manufacturing Purchasing Managers' index for May, a measure of manufacturing business conditions, is scheduled for release. The pace of growth in the Canadian manufacturing sector cooled slightly in April to a seasonally adjusted 52.9 as new orders slowed. (0930/1330) Brazil is scheduled to release trade balance data for May. The trade balance has been hit hard by rising fuel imports and a drop in the price of iron ore and some other key exports. A sharp depreciation of the Argentinian peso has also curbed manufacturing exports to the neighboring country. (1400/1800) Also on the radar is the HSBC Purchasing Managers' Index for May. High labor costs, poor infrastructure and a hefty tax burden still weigh heavily on Brazil's manufacturers, whose lackluster performance has weighed on economic growth. (0900/1300) Mexico's purchasing managers survey for May is expected to show if sluggish factory sentiment is picking up further after the index ticked up in April from a five-month low. (1030/1430) (Compiled by Ayesha Sruti Ahmed in Bangalore)