Investors braced for week of key data

(News Today) - Investors are braced for a week of crucial economic data that could decide the Federal Reserve's next move after chairman Ben Bernanke said it would ease policy if the outlook deteriorated "significantly".

Attention will focus on latest US employment figures on Friday, expected to underscore recent signs of a slowdown in the world's largest economy.

But analysts cautioned that there was no guarantee of early Fed action despite Mr Bernanke's pledge at the central bank's conference in Jackson Hole, Wyoming, at the weekend that it would "do all that it can" to boost the faltering recovery.

Economists at Goldman Sachs, among the most bearish on Wall Street, argued that Mr Bernanke's speech suggested that the central bank was taking a "minimalist approach" to further action for the time being. "The overall tone was one of watch and wait, despite ongoing signs that US economic activity has not only dropped below its potential growth rate but has a significant probability of weakening further, at least as we see it," they wrote.

Joe LaVorgna, chief US economist at Deutsche Bank, agreed that the Fed did not appear ready to pull the trigger on additional monetary easing: "A meaningful deterioration in the outlook -- ie financial market disruptions or a stalled labour recovery -- would be necessary to push them into action."

The mood at Jackson Hole was subdued, marked by warnings about a recent slowdown in the US recovery and continued high levels of debt. "The debt overhang bears the ultimate responsibility for slowing down the economic recovery," said Jean-Claude Trichet, chairman of the European Central Bank.

A sustained rise in unemployment is one likely trigger for the Fed to launch further quantitative easing by buying billions of dollars of long-term assets such as Treasury bonds in an attempt to stimulate the economy.

Non-farm payrolls data due on Friday, the most important indicator on the labour market and the US economy, are expected to show that private-sector employers created only 42,000 jobs in August and the unemployment rate rose, according to economists surveyed by Reuters.

The Institute for Supply Management index on Wednesday will show whether US manufacturers are still raising output. It is expected to fall from 55.5 in July to 53 in August. Numbers above 50 mean expansion.

The Bank of Japan may hold an emergency meeting to ease policy as early as today after governor Masaaki Shirakawa left Jackson Hole early. The BOJ is under pressure after the yen soared to Y85 to the dollar, threatening exports recovery.

Source : CNN

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