US stock investors will keep a close eye on Europe this week, looking for signs the debt crisis may be stabilising, while industrial production, housing starts and inflation data may offer more clues on the US economic outlook.
On Friday, an official said the European Union has reached agreement with Greece on how to move forward with pension reform, while Spain’s economy ministry said it has not made and will not make a request for economic aid from the EU.
Market sentiment has been plagued for weeks by worries that European debt problems, including those in Greece, Spain and Hungary, could affect the global economy.
The Standard & Poor’s 500 index is now down 10.3 per cent from its 23 April closing high for the year, and considered in correction territory.
“We’ve gone through a period of extreme nervousness... and problems haven’t gone away, but I think right now, global investors are little less jittery,” said Fred Dickson, chief market strategist at DA Davidson & Co in Lake Oswego, Oregon.
The Chicago Board Options Exchange’s Volatility Index or VIX, a measure of Wall Street’s anxiety, slid 5.82 per cent to end at 28.79 on Friday after rising more than 20 per cent a week ago.
The three major US stock indexes finished with gains for the week, with the Dow Jones industrial average up 2.8 per cent, the S&P 500 up 2.5 per cent and the Nasdaq Composite Index up 1.1 per cent.
“I will be looking to see if the euro holds gains that we saw in the last couple of days,” Dickson said.
The euro fell against the dollar on Friday. But that was its first daily decline since Monday, when it hit $1.1876 – its lowest level since 2006.
Wall Street will keep a weather eye this week on the recovery in the US housing sector, still deemed fragile with the expiration of a federal tax credit for home buyers.
US housing starts and building permits for May will be released on Wednesday. Economists forecast that housing starts will slip to an annual pace of 650,000 units in May from April’s pace of 672,000 units.
Both the Producer Price Index and the Consumer Price Index for May are expected from the US government.
The overall PPI for May, also due on Wednesday, is forecast to fall 0.5 per cent, compared with a 0.1 per cent dip in April. Core PPI, excluding volatile food and energy prices, is forecast to edge up 0.1 per cent in May, after rising 0.2 per cent in April.