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Financial Markets Preview – Week of April 6, 2014

Week in Review

us depart of laborGlobal stocks initially surged higher following the publication of a strong US labor report for March. However, investors subsequently dismissed this encouraging data by instigating a major sell-off in momentum stocks, such as TripAdvisor and Netflix. The NASDAQ was particularly hard hit by this latter catalyst causing it to crash by just over 2% during last Friday’s session. In fact, all the topmost US indices had a bad day exemplified by the Dow Jones Industrial Average plunging by almost 45 points; the S&P500 dropping by just over 10 points and the NASDAQ plummeting by 85 points.

The US Department of Labor presented its eagerly awaited non-farm payroll figure last Friday which disclosed that US employers had created 192,000 new jobs last month compared to market’ expectations of 200,000. The February number was also revised higher to 197,000. On not such ab optimistic note, the unemployment rate remained static by posting a second consecutive monthly value of 6.7%. Analysts were unquestionably impressed by these results as they definitely indicated that the US economy was gaining traction following a particularly harsh winter.

However, although equities rallied immediately in response to this strong data, they could not sustain their new bullish momentum throughout Friday’s session. This is because the latter part of last week witnessed practically the non-stop selling of momentum stocks as investors opted to adopt a more cautious stance. These equities basically comprise high flying companies, residing mainly within the technological and biotech trading sectors, which primarily generated the significant market rally during 2013.

Prominent analysts explained this new trend by stating that although these is no concrete evidence of a broad-based market correction at present, some traders are beginning to adopt a more defensive attitude in response to numerous worrisome global uncertainties. As such, they are reducing their exposure to those firms associated with high growth.

Elsewhere, the European Central Bank (ECB) refrained from altering its benchmark interest rate last week, as widely predicted, by retaining it at its historic low of 0.25%. However, Mario Draghi, the ECB President, issued comments during a subsequent press conference which exerted significant pressure on the euro. Specifically, he advised that the ECB anticipates that inflation within the Eurozone will remain very low for an extended time period. He added that if this state of affairs dragged on for too long then actions will be instigated, including unconventional measures, to correct this problem.

What to Expect this Week

The following major global economic indicators will be published during this coming week.

On Monday, the German Industrial Production figure will be posted. Analysts are predicting a minor decline although such a result should not detract from Germany publishing a strong Gross Domestic Product for the first quarter of 2014. Later in the session, the USA is scheduled to disclose its Consumer Credit Change which is predicted to rebound from January’s disappointing result.

The Bank of Japan (BoJ) will announce its Interest Rate decision and forward guidance policies earlier Tuesday. Although there is growing speculation that the BoJ will instigate new stimulus measures within the imminent future, it is not expected to do so at this meeting. Great Britain will then reveal its Industrial Production data which is forecasted to demonstrate an improvement following a disappointing start to 2014.  New Zealand will complete proceedings on Tuesday by issuing its Electronic Card Retail Sales which should extend its growth pattern for the second consecutive month.

Great Britain will publish its Trade Balance on Wednesday which is predicted to remain unchanged at 2.7bn Sterling form the previous month’s result. One of the pivotal events of the week will occur later in the day when the minutes of the last Federal Open Market Committee will be released. Investors will be keen to acquire greater insights into the deadline figures introduced by Janet Yellen, the new Chair of the US Federal Reserve, at the press conference following the last meeting.

Australia will kick off Thursday by posting its Employment Change and Unemployment Rate. Can the impressive increase of 43,000 jobs for February be repeated for last month? Later in the session, China will publish its Trade Balance number and investors are hoping for a healthy rebound following February’s dismal performance. France will then post its Industrial Production indicator which is expected to confirm that its annual growth rate remains subdued.

Friday will witness the University of Michigan and Reuters presenting a key consumer sentiment index. Analysts are predicting an improvement as a result of improving weather conditions over the resilient 80.0 figure which has been recorded during recent months.

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