US Markets

Fed meeting to take center stage for investors

U.S. stock index futures moved higher at the start of the week, ahead of a Wednesday meeting of Federal Open Market Committee (FOMC) which some believe could culminate in the start of the slowing down of the U.S. Federal Reserves's $85 billion monthly bond-buying program.

After a favorable employment report for November, firm retail sales, and the establishment of a bipartisan budget proposal, many economists and analysts see a significant chance that the U.S. Federal Reserve could reduce its stimulus program at this week's meeting.

"We now look for the Fed to do something meaningful at the December 18 meeting," wrote Michael Moran at Daiwa Capital Markets America in a note. "We view the announcement of a reduction in asset purchases as the most likely outcome; absent this, we expect some type guidance on the FOMC's plans for the effort."

The U.S. economy added a better-than-expected 203,000 jobs in November, and the unemployment rate dropped to a five-year low of 7 percent. The Senate will vote this week on the bipartisan budget agreement that was agreed on December 10 and approved by the House.

However, in a note late last Friday, Goldman Sachs argued the central bank was likely to hold off from tapering until next year. "The case for tapering on the basis of the data since October is mixed at best. The strongest argument in favor is the improvement in the trend rate of payroll growth to the 200,000 level," Goldman Sachs economists wrote.

The S&P 500 and the Dow Jones Industrial Average fell for a second weekly decline at close on Friday, their first back-to-back weekly loss in just over two months. Futures for both the S&P and the Dow, along with Nasdaq, posted slight gains on Monday, 

On Monday, caution dominated the tone of trade in Asian equity markets after a preliminary reading of Chinese manufacturing activity fell to a three-month low in December, according to purchasing managers' index (PMI) survey conducted by HSBC.

Elsewhere, euro zone December flash composite PMI was up 52.1 compared to 51.7 in November, helping to push European equities higher in late morning trade.

U.S. productivity rose 3 percent in the third-quarter, in line with expectations, while a gauge of manufacturing activity in the New York region climbed to 0.98 in December.

U.S. investors will likely look towards the telecommunications sector at open on Monday, after the Wall Street Journal reported that Sprint Corp. is looking at a possible bid for is rival, T-Mobile US, a deal that could be worth $20 billion.

A merger of the third and fourth largest U.S. carriers would create a huge competitor to industry leaders Verizon Wireless and AT&T, as well as make the U.S. market dominated by three big companies.