Charting a path to 'normalization'
By Robin Emmott
BRUSSELS (Reuters) - Investors shift focus this coming week from trouble spots such as Portugal's biggest listed bank to a marathon testimony by the U.S. Fed chair that could help chart a global path towards post-crisis "normalization".
Concerns about losses associated with the founding family of Banco Espirito Santo had threatened to rattle euro zone markets, but by Friday traders had decided that BES was unlikely to disrupt Portugal's financial system or revive broader worries about the bloc's weaker economies.
In any case, Janet Yellen's two-day appearance in the U.S. Congress from Tuesday will dominate global markets, which want above all to know how long the Federal Reserve will leave interest rates low after an unprecedented period of cheap money since the financial crisis.
While October is likely to mark the end of the central bank's money printing, investors are looking for hints of an interest rate hike early next year, which would signal a return to normality after the Great Recession and its aftermath.
But much depends on the health of the U.S. economy and its ability to bounce back from a disastrous first quarter.
The number of Americans filing new claims for unemployment benefits for the week ended July 5 fell to one of its lowest levels since before the 2007-09 recession, more evidence of a strengthening labor market.
The consensus has been for a rate hike in late 2015, but many economists are bringing forward their forecasts, with European-based banks including BNP Paribas expecting the Fed to hike near the middle of next year.
Others expect U.S. interest rates to rise sooner. Continued...