Major Events of Last Week
The publication of impressive economic data by the USA and the presentation of hawkish speeches and testimonials by Janet Yellen, the Chairperson of the US Federal Reserve, during the course of last week, unquestionably bolstered prospects that the US Central Bank will hike interest rates before the end of 2015. Progress was also made to resolve the Greek debt crisis when the German parliament passed an important bill permitting the Eurozone to commence defining a third bailout package with Greece. The leading US indices produced mixed reactions last Friday exemplified by the Dow Jones Industrial Average slumping almost 54 points; the S&P500 falling by nearly 1 point but the NASDAQ recording an historic high by edging just over 35 points higher.
The US Labor Department posted key economic data late last week disclosing that consumer prices that increased during June for the fifth consecutive month by climbing 0.3%. Additional indicators provided further credence to the viewpoint that the US economy has now attained such a healthy state that it could definitely withstand the instigation of an interest rate hike this year. For example, housing starts surged by almost 10% during June. Prominent analysts responded to these positive developments by stating that the Fed should now acquire sufficient confidence to implement its first rate increase in practically ten years.
The prospects of an imminent Greek debt deal were significantly boosted towards the end of last week after the German parliament voted in favor for the commencement of fresh negotiations between the Eurozone and Greece with the intent of detailing a third bailout package. German lawmakers approved this motion by registering 439 ‘Yes’ votes compared to 119 ‘No’ ones with 40 abstentions. This event was a major hurdle to overcome since Germany is Greece’s largest creditor within the Eurozone. Prior to the vote, Angela Merkel, the German Chancellor, had emphatically warned about the ensuing chaos that would arise if Greece was rejected from the Eurozone.
The NASDAQ climbed last Friday to post a record high fueled by the publication of an impressive earnings report for the second quarter of 2015 by Google. The internet search giant disclosed that its better-than-expected profits had been powered by a substantial boost in advertising revenue. Google subsequently witnessed its shares soar by nearly 17% enabling NASDAQ to register a historic high. However, the Dow and the S&P500 did not fare so well since both were suppressed by a declining US energy sector and a poor quarterly performance by Boeing. For instance, Boeing shares crashed by 1.2% after company profits were severely hit by problems with its KC-46 aerial refueling project.
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What to Expect This Week
The following major economic data will be posted over the course of the coming days.
The Bank of Japan (BoJ) will launch the week by presenting the minutes from its last monthly policy meeting. Investors will be keen to learn if BoJ is currently considering the imminent implementation of any new stimulus policies in order to boost Japan’s faltering economic recovery.
On Tuesday, Australia will declare its Consumer Price Index for last month, which should extend last month’s increase of 0.2%. Such a result will confirm that the threat of deflation now appears to be under control.
The Bank of England (BoE) will reveal its monthly policy minutes on Wednesday. Analysts will be especially interested to verify if the recent hawkish speeches delivered by Mark Carney, the BoE Governor, are fully supported by other BoE committee members. Any mention of an imminent rate hike will boost Sterling. Later, Japan will publish its Trade Balance for June, which is expected to record a recovery this time around. The Reserve Bank of New Zealand (RBNZ) will complete the session by announcing its latest interest rate decision. A cut from 3.25% to 3% is presently the favored forecast.
On Thursday, the United Kingdom will issue its Retail Sales figure for June, which is predicted to increase by 4.8%. The USA will then proclaim a key business confidence index for this month. A positive rebound from the prior reading of -0.17 to -0.05 is currently the preferred outcome. A miss could weaken the US Dollar amid escalating concerns about the true health of the US economic recovery.
The Eurozone will commence Friday by delivering a spate of Purchase Managers’ Indices (PMI) from key member nations, such as Italy, France and Germany, etc. This data should confirm that the economic recovery of the currency bloc continues to gain traction. The USA will complete the week by disclosing the first sighting of its own PMI for July. If an expected increase is validated, then such an outcome will bolster prospects that the Fed could hike rates as soon as September.
