Major Events of Last Week
At the end of a turbulent 2015, the world’s stock markets still succeeded in registering a fourth year of consecutive gains. The key catalysts behind these bullish surges were the persistent implementations of monetary easing policies by major central banks. For example, Wall Street posted record highs last year; Japanese stocks hit their highest levels since the start of 2000 while European shares reached historic heights. However, a number of negative influences did manage to cap further global growth such as a worrisome Chinese economic slowdown and the dramatic decline in oil prices. The premier US indices finished 2015 on a down note exemplified by the Dow Jones Industrial Average plummeting nearly 115 points; the S&P500 falling by slightly over 11 points and the NASDAQ dropping by almost 33 points.
The world’s central banks were particularly active during 2015 providing the stimulus for many of the most prominent bullish surges in equity prices. For instance, the US Federal Reserve finally instigated its first interest rate hike for practically a decade during December. The Fed made this vitally important decision after determining that the US economic was now strong enough to withstand the impacts of a new monetary tightening phase. This judgment was underpinned by a constantly strengthening US labor market and indications that inflation was now on course to hit the Fed’s designated target.
Elsewhere, the European Central Bank (ECB) also made aggressive efforts to bolster the faltering European economy and counter the persistent threat of deflation. Specifically, the ECB introduced new stimulus measures by activating an extensive monthly bond purchasing program. The subsequent injection of over 1 trillion euros enabled European stocks to record 7% growth during 2015 despite sliding about 0.2% on New Year’s Eve. Many analysts now consider that European assets could well be the optimum choice for investors in 2016.
The Bank of Japan (BoJ) also supported proactive quantitative easing policies during 2015 helping the Nikkei to post an annual growth of 9%. However, other parts of Asia did not fare as well as they were hurt by the persistent slump in oil prices and concerns about the true health of the Chinese economic recovery.
Experts have now concluded that the stronger US Dollar was the primary factor behind the stellar performances of Japanese and European equities last year. One of the other most important developments during 2015 was, unquestionably, the stunning collapse in oil prices which completely undermined commodity prices. Crude crashed by nearly 38% last year adding to its 48% decline in 2014.
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What to Expect This Week
The Eurozone will commence 2016 by presenting a spate of Purchasing Managers’ Manufacturing Indices (PMIs) for December on Monday which should register minor growth. If confirmed, then such outcomes should provide additional proof that the new stimulus measures of the European Central Bank (ECB) are beginning to bear fruit. Later, the US Institute of Supply will disclose its Manufacturing Index for last month. This indicator is forecasted to rise from its previous reading of 48.6 to 49.2 this time around.
On Tuesday, the United Kingdom will reveal its own PMI for December. If the predicted outcome of 55.6 is missed, then Sterling should come under fresh pressure. The European will next publish important inflationary data. Economists are hoping that this data can emphatically ratify that the threat of deflation is now fully under control. Japan will complete the session by releasing its PMI Composite for last month. A reading above 52.3 should provide the Yen with a boost.
The European will launch Wednesday by posting another batch of PMI figures. The ECB will inspect these values very carefully in order to determine if inflation is starting to move toward its designated target of 2%. Next, the USA will issue its latest International Trade indicator for December which is projected to widen from its previous reading of -$43.9B to -$44.4B. One of the key events of the week will then occur during the afternoon EST when the Fed will post the minutes from the last meeting of the Federal Open Market Committee (FOMC). This document is extremely important as it could provide vital insights into why the US Central Bank finally decided to hike rates last month.
On Thursday, the ECB will deliver a major Economic Survey Index. Expert consensus is favoring a 106.1 return. Later, the USA will divulge its ‘Jobless Claims’ number for the previous week ending 3rd January 2016. If this indicator surpasses analysts’ expectations of 287,000, then it will verify that the US labor market is still gaining traction. Australia will terminate the day by announcing its Retail Sales for December. Current concerns about the health of the Aussie economy could be pacified if this number beats the anticipated 0.5%.
One of the pivotal events of the week will transpire on Friday when the USA releases its first labor report for 2016. Economists are currently advising that US employers created 200,000 new jobs last month compared to 211,000 generated in November. Despite the slight decline, such a figure would extend a long continuous sequence of successive months of growth and could provide an incentive for the Fed to hike once again during the first quarter of 2016.
