World shares made guarded gains today, encouraged that Wall Street was able to weather a seemingly disappointing US jobs report last week but with more than enough event risk ahead to keep investors cautious.
European stocks got off to steady start, holding their ground along with safe-haven German Bunds as moves remained limited ahead of the week’s bigger events.
The new head of the Federal Reserve, Janet Yellen, delivers her first testimony to the House of Representatives tomorrow and the Senate on Thursday.
Markets will be hoping for reassurance that policy will stay loose for a long time to come.
Japan's Nikkei led the way in Asian trading, with a rise of 1.3 per cent to 14,668, and away from last week's trough at 13,995. Shanghai also added 1.7 per cent after its recent sell-off. But emerging market tensions were back in focus after credit rating downgrades late on Friday for Turkey and Ukraine, two of the countries most under fire in markets.
Turkey’s lira and its main stock market suffered their biggest falls in a week although losses in Ukrainian assets were limited by its imposition from Friday of capital controls.
Expectations that cuts in US monetary stimulus, which has buoyed risk assets for several years, are one of the main reasons for the pressure being seen in emerging markets.
Ms Yellen will be able to offer her own reading of the jobs report before lawmakers this week, which could give markets a fresh steer on the pace of stimulus withdrawal.
Analysts generally assume she will stick to the script of recent policy meetings, reiterating that a gradual decline in asset buying is likely as long as the economy continues to improve as assumed.
"We expect her to state that tapering is not on a pre-set course and the committee will adjust course as needed, particularly if the expected firming in growth and gains in payrolls do not persist," Barclays analysts said in a note.
Ms Yellen is also likely to repeat the standard forward guidance that the funds rate will remain near zero until the unemployment rate falls well below 6.5 percent, as long as inflation is subdued.
