Week in Review
Global equities succeeded in edged higher last Friday buoyed by the release of a key economic indicator by Germany which surpassed analysts’ expectations. Investors were also encouraged by the Greek government declaring that it will do “whatever it can” to resolve its nation’s debt crisis as rapidly as possible. Oil prices staged a recovery towards the end of last week by topping $60 per barrel for the first time in 2015. The USA posted disappointing data last Friday disclosing a slump in import prices and a surprise decline in consumer confidence. The premier US indices crept higher last Friday epitomized by the Dow Jones Industrial Average climbing by nearly 36 points; the S&P500 inching higher by almost 5 points and the NASDAQ rising by 27 points.
The markets were pleasantly surprised last Friday when Germany posted data revealing that its economy expanded at twice the rate than that predicted by most leading economists. The powerhouse of the Eurozone printed a Gross Domestic Product of 0.7% for the last quarter of 2014 surpassing analysts’ expectations of 0.3%.
However, the USA did not fare as well as it was unable to sustain its recent spate of impressive releases. Inflation concerns came to the fore after import prices unexpectedly slide by 2.8% last month to register their biggest decline since late 2008. In addition, consumer sentiment plunged from an 11 year high boosting fears that retail spending may remain subdued for some time yet. Investors were quite surprised by the latter weak indicator especially considering the strengthening labor market, falling oil prices and increasing wage growth.
The upside of the stock markets remained capped last week amid a distinct lack of progress in Greek debt negotiations. Hope for a swift resolution did increase last Friday after the Greek Government emphatically stated that it was now ready to do whatever it could to achieve a deal with its primary creditors. In contrast, key finance representatives of the Eurozone were not so optimistic by assertively dismissing any chances of a swift conclusion to this crisis.
Oil prices continued to surge higher late last week by breaking above their psychologically important $60 per barrel handle for the first time this year. The commodity was bolstered by strong German economic growth and a possible decrease in US production. However, analysts were quick to explain that the fundamental factors driving the recent dramatic collapse in prices remained unchanged as global stockpiles were still excessive. Brent has now crashed from a peak of about $115 per barrel in June last year to $46 in January, when it posted a six year low.
What to Expect This Week
The coming days will witness the publication of a bout of key global economic indicators, as follows.
The Eurogroup is scheduled to conduct an all-day meeting on Monday. The focus of this conference will be the production of a resolution for the current Greek debt crisis.
On Tuesday, the Reserve Bank of Australia (RBA) will present the minutes from its latest monthly policy meeting. This document should provide key insights into why the RBA instigated a surprise interest rate cut at the start of February and whether any more are in the pipeline. Great Britain will then disclose its Consumer Price Index for January and a drop to 0.3% is presently the favored outcome. Later, Germany will reveal an important Economic Sentiment Survey for this month which is expected to increase for the fourth consecutive month. The Chairman of the Swiss National Bank, Thomas Jordan, will later deliver a speech during which he should vindicate the recent removal of the SNB’s Franc/euro cap.
The Bank of Japan will launch Wednesday to announcing its latest Monetary Policy Statement and holding a supporting press conference. The outcome of the Japan’s latest Gross Domestic Product should determine whether any further stimulus is required to boost the national economy. Later, the United Kingdom will publish its Labor Report for January and its key statistics are forecasted to beat analysts’ predictions, once again. The Monetary Policy Committee of the Bank of England will then declare its Rate Votes. As this event is not expected to generate any major surprises, it should be a muted affair. The USA will subsequently issue its House Starts and Building Permits for last month and both are expected to surpass market expectations of 1 million. The US Federal Reserve will then release the minutes from its last policy meeting which could provide vital insights into when this Central Bank will instigate its first interest rate hike.
The USA will deliver its Philly Fed Manufacturing Survey for this month on Thursday. Investors are hoping for a rebound from two months of depressing readings.
On Friday, Germany will announce its Services and Manufacturing PMIs for February. The euro could come under fresh pressure if either of these figures contract by printing values below 50. Great Britain will then present its Retail Sales figure for January which is predicted to drop by 0.1%. Finally, Canada will display its own Retail Sales result for December which has the potential to beat analysts’ expectations of -0.3%.