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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
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)