Two key releases in the United States in this holiday-shortened week will be used as a guide to whether an interest rate rise by the Federal Reserve will happen as soon as next month.
The US holds Memorial Day on May 30 (US time) to remember soldiers who died in the American Civil War.
Craigs Investment Partners broker Chris Timms said yesterday the inflation and employment data were both important. Fed policymakers would be looking at those numbers as they decided whether to raise rates in June and traders would read them to try to get ahead of the Fed decision.
Market pricing was suggesting a 30% chance of a Fed rate rise in June, rising to 53% in July.
The jobs report was expected to show an increase of 160,000, the same as the previous month. However, 35,000 Verizon workers were on strike during the survey week, which could artificially depress the results.
The unemployment rate was forecast to fall to 4.9% from 5%, while average hourly earnings were forecast to increase 0.2% for the month and 2.5% for the year - compared with 0.3% and 2.5% a month ago, he said.
For most of the current bull market in the US, stocks had been sold off on expectations of tighter monetary policy. But they rose sharply in the past week as the Fed turned more hawkish.
The Fed had remained constant in using economic data to decide whether to lift the Fed funds rate. On Friday, Fed chairwoman Janet Yellen said if current conditions held, a rate hike in the next few months would be "appropriate''.
Analysts at Bank of America-Merrill Lynch said in research notes stocks had not yet priced in a rate hike in June or even July.
"The vast majority of `hawkish' industries, which have outperformed when rate hikes have been pulled forward by the market, are still cheap. Most 'dovish' industries, which have outperformed when rate hikes have been pushed out, are still expensive.''
They listed consumer finance, banks and insurance among industries as appearing cheap, while beverages, real estate investment trusts and electric utilities still ranked as expensive, even though they benefited from policy the Fed seemed to be walking away from, the analysts said.
Locally, the monthly ANZ business confidence survey would be released today and would be one of the key releases this week.
Last month, business confidence was up slightly. A net 6.2% of businesses reported they were optimistic about the coming year, up from 3.2% in March.
Mr Timms said no changes were likely at the European Central Bank meeting this week when it met in Vienna.
Since the ECB released a package of stimulus measures in March, most indicators out of the region had been solid.
"We've also seen a strong lift in oil prices which could see the bank take a more constructive view on inflation over the coming year. It is unlikely we will see any major new initiatives from the ECB this week.''
The ECB would want to remind the market of its commitment to do "whatever it takes'' without fuelling expectations of major new measures, he said.
Cutting rates further into negative territory remained an option, although the ECB would not want to move any more aggressively than it had to, given the negative implications for bank profitability. The ECB would want to find a balance, leaving the door open for further moves later in the year but without letting market expectations back it into a corner, Mr Timms said.
