Major Events of Last Week
The stock markets slumped last Friday after the US Department of Labor released its eagerly awaited monthly report confirming solid employment growth during July. After studying the details carefully, analysts concluded that this robust performance is now capable of convincing the US Federal Reserve to instigate its first interest rate hike in nearly 10 years as early as September. Specifically, they advised that the odds for a ‘no action’ decision in that month have now been considerable reduced. The leading US indices responded accordingly by crashing lower last Friday confirmed by the Dow Jones Industrial Average plunging by nearly 48 points; the S&P500 dropping by just over 5 points and the NASDAQ falling by almost 13 points.
The prospects of a September interest rate hike by the Fed increased substantially at the end of last week after news revealed that US employers created 215,000 new jobs during last month matching market expectations. The creation of new posts within the key manufacturing and construction sectors successfully managed to counter a slump in mining. Further good news was demonstrated by the US national unemployment rate remaining steady at a 7 year low of 5.3%.
Investor sentiment received another boost after the May/June combine total was revised higher by an additional 14,000 new jobs. This solid report is now expected to comply with the recent stipulation of the US Central Bank stating that a ‘further improvement in the labor market’ is required before it will increase its benchmark interest rates. For example, the jobless rate of 5.3% is now hovering very close to the range that many Fed committee members consider is indicative of a steady, low inflationary level.
Elsewhere, the Greek debt saga continued to stagger onwards with negotiators attempting to reach an agreement by the middle of August. Last week ended with senior officials from the Eurozone conducting a telephone conference in order to assess the progress made in achieving this objective. Comments released after this event informed that Germany, one of Greece’s leading creditors, emphatically warned against excessive haste.
This is because Alexis Tsipras, the Greek Prime Minister, is currently striving to conclude a deal within a couple of weeks so that his nation can honor a major bond repayment to the European Central Bank, scheduled for the 20th August. He is attempting to obtain a third bailout of about 86 Billion euros from the International Monetary Fund (IMF) and European primary bank sources. This new funding is desperately needed in order to prevent national bankruptcy and for Greece to retain its membership of the Eurozone.
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What to Expect This Week
The Bank of Japan (BoJ) will set the ball rolling by presenting its monthly report on Monday. Economists are expecting that this document will not provide any new insights into BoJ future policy intentions this time around.
On Tuesday, Australia will disclose a key Business Confidence Index for July which should register growth for the second successive month. Any failure to do so could exert fresh pressure on the Australian Dollar. Germany will then reveal its ZEW Economic Survey for August, which is forecasted to rebound after experiencing a recent sequence of monthly declines.
China will commence proceedings on Wednesday by publishing a spate of leading indicators for July including Retail Sales, Fixed Asset Investment and Industrial Production. This data should demonstrate that the previously faltering national economic is beginning to recovered epitomized by Retail Sales rising to 10.6%; Asset Investment increasing to 11.5% and Industrial Production climbing to 6.6%. The United Kingdom will complete the session by issuing its Jobless Claims for July and unemployment rate for the last Quarter. The former should record a change of 2.5k while the latter should remain stable at 5.6%. Watch for Sterling weakness if these numbers miss their mark.
On Thursday, the USA will declare its Retail Sales for last month. An encouraging rebound is presently the favored outcome following June’s very disappointing performance. At the same time, the latest US Unemployment claims figure will be announced for the previous week. The recent declining trend should be enhanced once again especially following the release of a solid jobs report late last week.
Germany will disclose the first sighting of its Gross Domestic Product (GDP) for the second quarter (Q2) of 2015 on Friday. This European economic powerhouse is forecasted to post encouraging growth of 0.5% for that period. The Eurozone will then proclaim key inflationary data for last month and also its own GDP for Q2. Consumer Prices are anticipated to have slumped by 0.6% on a monthly basis while GDP should have expanded from its prior reading of 1% to 1.3% annualized. The USA will then complete the week by presenting its Industrial Production result for last month. Although this parameter has suffered recently from reduced capital investment, the strong US dollar and a declining global demand; expert consensus is currently supporting a 0.3% recovery.
