Stock markets eye Fed meeting for further cue

Better-than-expected corporate earnings helped US stocks gain nearly 2% last week even as shares fell on Friday after government data showed a larger-than-expected drop in July payrolls.

For the week, the Dow advanced 1.8%, the S&P 500 gained 1.8% and the Nasdaq rose 1.5%.

Focus for this week will be on the Federal Reserve, which may provide a fillip to an otherwise dull summer market. The Fed's policy-making committee is due to meet on Tuesday and investors are leaning toward the view the US central bank will resort once more to some mild quantitative easing, which may be good or bad for the market.

In corporate earnings, major retailers including Macy's Inc, JC Penney Co Inc and Nordstrom Inc are due to report this week.

In Europe, equities climbed last week after earnings from HSBC to BNP Paribas offset weaker- than-forecast US data that reignited concerns about the strength of the recovery in the world’s biggest economy. 

The Stoxx Europe 600 Index gained 1.3% to 259, extending last month’s gain of 4.9%. Germany’s DAX rose 1.8%, the UK’s FTSE 100 advanced 1.4% and France’s CAC 40 climbed 2%.

Asian stocks climbed for a fifth consecutive week, the longest winning streak in more than 12 months, after companies reported higher earnings or raised forecasts.

Japan’s Nikkei 225 Stock Average advanced 1.1% last week and South Korea’s Kospi Index gained 1.4%. Hang Seng Index rose 3.1%, while China’s Shanghai Composite Index moved up 0.8%.

Nikkei is likely to decline today after the disclosure of weaker-than-expected US employment data. The benchmark index is likely to move between 9,450 and 9,650, according to market players.

As the Fed officials meet tomorrow, markets will watch closely for signals officials are growing more worried the recovery is at risk or that there is danger of plunging into a damaging vicious cycle of falling prices and slowing growth.