Week In Review
Geopolitical events continued to dominate the financial scene towards the end of last week. Specifically, investor sentiment received a substantial boost after emerging news disclosed that Russia was terminating its extensive military operations near the eastern border of Ukraine. Earlier in the week, over 20,000 combat-prepared troops had been deployed within Southern Russia posing a serious threat of invasion. As such, the withdrawal of these troops prompted the world to sigh a breathe of relief last Friday causing global equities to rally strongly exemplified by the Dow Jones Industrial Average surging by nearly 80 points; the S&P500 inching higher by 8 points and the NASDAQ climbing by slightly over 12 points.
The Russian Defense Minister initiated a significant bullish mood last Friday by announcing the end of military exercises in Southern Russia. Investors had been unquestionably alarmed during the course of last week by the presence of such a powerful force posing serious threats of a Ukrainian invasion. East/West relationships deteriorated even further by the instigation of new European sanctions against Moscow and the subsequent retaliatory bans of western products by Russia.
These ominous developments certainly capped any bullish aspirations throughout last week causing global stocks to slide lower. Many prominent nations, especially the USA, were highly critical of Vladimir Putin, the Russian President, for instigating actions capable of totally destabilizing an already volatile crisis. Prominent analysts summarized the hopeful events of last Friday by stating that although the sabre-waving phase may now have subsided, the full drama is far from finish. Nevertheless, investors were still inspired to increase their risk appetite enabling global equities to finish the day on a positive note.
However, traders should still adopt caution over the coming weeks as the Ukraine/Russia crisis and other major geopolitical events definitely possess the ability to wreak further havoc on the financial markets. For example, Barrack Obama, the US President, sanctioned military action against Iraq last Friday by authorizing the launch of a sequence of air strikes. In a subsequent speech, Obama justified the use of such force as a legitimate means of protecting both US personnel and terrorized Yazidi civilians in the region. Following this statement, the US aircrafts targeted the Islamic artillery bombarding Kurdish troops near the Iraqi city, Arbil. With violence also resuming in the Gaza Strip after a short cease-fire, oil prices came under pressure amid escalating risks within one of the most active producing regions in the world.
What to Expect This Week
A number of major global economic indicators are scheduled for release during the course of this coming week.
After a quiet Monday, Australia will post a key Business Confidence Index for July on Tuesday which is expected to decline after many months of successive growth. Germany will then present an important Economic Sentiment survey. The recent release of weak economic data by the Eurozone and the deteriorating Ukraine/Russia crisis could weigh on this parameter. Japan will finish the session by announcing its Gross Domestic Product for the second quarter of 2014. Although economists are predicting a decline of 1.8%, the result may well be even worse.
On Wednesday, China will launch proceedings by delivering a spate of figures including Urban Investment, Industrial Production and Retail Sales for July. This data dump is difficult to predict with any accuracy following a mix bag of recent releases. The United Kingdom will subsequently issue its July Unemployment Rate and Claimant Count Change for July. Since the start of 2013, these parameters have acquired an impressive track-record of surpassing analysts’ expectations. Later, the Bank of England (BoE) will publish its Quarterly Inflation Report followed by a speech by Mark Carney, the BoE Governor. Great attention will be paid to these events as Carney is renowned for using both to signal future guidance policies. The USA will then disclose its Retail Sales figure for July. Despite strong economic releases recently, expectations for this parameter are quite low with a 0.3% increase predicted. Towards the end of the day, New Zealand will reveal its own Retail Sales number of its second quarter which is expected to record a below par value.
The Eurozone will kick-off Thursday by presenting its Gross Domestic Product for the second quarter of 2014. This figure could surprise to the downside with Europe struggling to acquire any significant economic traction.
Great Britain will deliver the second estimate of its Gross Domestic Product for its second quarter on Friday. This event is anticipated to be a muted affair by confirming the previous 0.8% rise. Next, Canada will post its Manufacturing Sales figure for June. Pundits are forecasting that this parameter could disappoint this time around by failing to meet last month’s increase of 1.6%. The USA will then complete the week by publishing its Industrial Production reading for July and a key Consumer Sentiment Index for August. Investors will be keen to learn whether the former can achieve its predicted 0.4% increase. The latter could register a weaker-than-expected outcome with geopolitical drama taking its toll on public optimism.