Major Events of Last Week
Investors adopted a cautious stance during the earlier part of last week as they anxiously awaited the release of the all-prevailing US Labor Report on Friday. Their vigilant approach was unquestionably justified as the Non-Farm Payroll figure utterly stunned the markets by posting its lowest value in over 12 months. As a direct consequence, the recent impressive rally of the US Dollar against other major international currencies came to an abrupt end with the greenback weakening substantially across the board. Greece, which is on the verge of bankruptcy, became even more desperate last week after failing to negotiate a positive resolution to its debt crisis. The leading US indices inched higher at the end of a shortened week exemplified by the Dow Jones Industrial Average surging by just over 65 points; the S&P500 edging upwards by nearly 7 points and the NASDAQ trending water.
The US Department of Labor published its highly anticipated labor report last Friday disclosing that national employers unexpectedly created much fewer new jobs during March than analysts had predicted. Specifically, Non-Farm Payrolls registered an increase of just 126,000 compared to economists’ expectations of 244,000 and last month’s stellar performance of about 290,000. Officials advised that this substantial deterioration was primarily caused by declining oil prices; a strengthening US Dollar and harsh wintry conditions in North America.
Other key statistics revealed that although the jobless rate remained steady at 5.5%, the labor participation rate slumped to a 36 month low. Analysts summarized these developments by advising that this report definitely vindicates the recent release of other key data, which have strongly asserted a sizeable slowdown in US economic growth during the first quarter of 2015. They also added that this significant weakness in the US labor market may now be sufficient to convince the US Federal Reserve to delay the instigation of its first interest rate hike until much later this year or even into 2016.
One of the immediate impacts of this disappointing report is that it abruptly terminated a remarkable US Dollar rally which was initially activated during June of 2014. During this period, the greenback has practically appreciated 13% in value against a basketful of other leading global currencies. Many economists have been advising for some time that the US Dollar was ripe for a correction since its strength was starting to stifle the profits of major US international companies.
Greece should grab center stage next week as it is on the brink of running out of finance. Athens must strive to service a loan repayment to the International Monetary Fund MF by this coming Thursday in order to quality for further bailouts.
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What to Expect This Week
The ensuing key economic data is scheduled for release this week. In addition, investors will especially focus on learning how precisely the release of a much weaker-than-expected US labor report last Friday will impact the markets.
Australia will commence the week by presenting its Retail Sales on Monday. Analysts are predicting that this indicator will extend last month’s growth of 0.4% by indicating an improvement in consumer sentiment.
On Tuesday, the Reserve Bank of Australia will disclose its latest future guidance policy. Traders will be keen to discover if the RBA will implement an interest rate cut as many analysts are currently predicting. Germany will then provide an important inflationary figure by announcing its Purchasing Managers’ Index (PMI). If this reading slumps below its prior reading of 53.8, then the euro could come under pressure. Shortly afterwards, the Eurozone will release the PMI for the entire trading region. Economists are currently favoring a result of about 53.3. Next, Great Britain will reveal its Services PMI for March which is expected to weaken from its prior 56.7.
Switzerland will proclaim its Consumer Price Index for March on Wednesday. Analysts are forecasting a rebound from the previous slump of -0.3%. The pivotal event of the event will then occur during the afternoon, EST, when the Federal Open Market Committee posts the minutes from its last policy meeting. This event will be highly monitored and scrutinized by market participants for any clues pertaining to the exact timing of an interest rate hike by the US Federal Reserve. This will be especially so following the release of a very disappointing US labor report last Friday.
On Thursday, the Bank of England will issue its latest interest rate decision. As most economists are predicting a ‘No Change’ status, this occasion could simply register as a ‘non-affair’. The USA will subsequently proclaim a key unemployment statistic by releasing its Jobless Claims later in the session. Investors will carefully evaluate this reading with the primary intent of determining whether it also supports slowdowns in both the labor scene and economic growth.
Canada will complete the week by publishing major housing and unemployment data on Friday. Housing Starts are forecasted to have decline during last month amid difficult wintry conditions. The number of jobs created by Canadian employers could well track the decline recorded by the USA by falling sharply during March.
