Major Events of Last Week
Late last week, the US Department of Commence published the second revision of its GDP for the fourth quarter of 2015 disclosing that the US economy grew at a faster pace than expected. Specifically, GDP expanded by 1% during the last three months of last year compared to economists’ expectations of 0.4% and the initial revision of 0.7%. Consequently, this result helped annual growth achieve a final figure of 2.4% for 2015.
The primary catalyst driving the encouraging improvement, recorded during the last quarter, was the efforts of US businesses to retain their unwanted inventory instead of embarking on a major sell-off as anticipated by many analysts. As such, receding stocks generated only a 0.14% drop in the GDP compared to the previously advised 0.45%. Nevertheless, prominent economists were quick to advise that this smaller decline in inventories could now restrict any sizeable GDP rebound during the first quarter of 2016. However, they still predict that growth of 2.5% could be attained during the first three months of this year which should suppress any festering concerns about a new US recession.
During the G20 meeting of global financial minsters, convened in Shanghai, last week, the Chinese Premier, Li Keqiang, strived hard to convince delegates that the recent worries concerning his national economy were merely of a temporary nature and, as such, should be corrected within the imminent future. He also emphatically recommended that G20 members should now make greater coordinated efforts to combat increasingly complex financial and economic developments.
Investor morale was bolstered even further last Friday by oil prices extending their recovery after experiencing a serious and persistent slide during recent months. This rally was primarily driven by a significant increase in US Gasoline demand and the release of a better-than-expected GDP result by the USA.
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What to Expect This Week
China is scheduled to present its official Purchasing Managers’ Indices (PMI) late Monday. Investors will nervously await this information hoping that it will verify a comeback following the recent uncertainties and high volatility associated with the Chinese stock markets. However, any reading below 50 could spark another serious global sell-off in equities. Later, the Reserve Bank of Australia (RBA) will announce its latest interest rate decision. The RBA is widely anticipated to kept rates unchanged although any accompanying dovish statements could cause the Australian Dollar to tumble.
On Tuesday, Canada will disclose its Gross Domestic Product (GDP) for December. A stronger-than-expected result could help the Canadian Dollar add to its recent gains. The USA will then reveal its PMI (Manufacturing) number for February. Expert consensus is presently favoring a print within the 48-49 range for the fourth consecutive month confirming that US factory output continues to decline.
The US will launch Wednesday by publishing a prominent labor report from its private sector. Employers are forecasted to have created about 185,000 new posts during last month.
On Thursday, the United Kingdom will post its PMI (Services) which should confirm that this sector continues to emphatically outperform manufacturing. A value between 55.1 and 55.6 is currently the preferred forecast. The USA will next issue its own Services PMI which is expected to have contracted during February. Most analysts are anticipating a result about the 49.8 value.
The pivotal event of the week will occur on Friday when the USA releases its all-prevailing Non-Farm Payrolls (NFP) figure for February. A rebound is presently the favored prediction as US employers are expected to have created about 195,000 new jobs compared to January’s disappointment of 151,000. Importantly, if wages continue to grow for the second consecutive month, then such an outcome may incite the US Federal Reserve to adopt a more hawkish stance.
