Major Events of Last Week
The second reading of the US GDP for Q1 for 2016 confirmed that the US economy grew at the faster pace of 0.8% compared to its initial rate of 0.5%. Although investors welcomed this upgrade, it was still the weakest performance since the first three months of last year. The major catalysts driving this bullish result were a spate of superior trade parameters such as corporate profits which rebounded from -8.4% in the fourth quarter of 2015 to +0.6% in the first quarter of 2016. Wage growth was also revised higher from its previous print of +1.9% to 2.2% this time around bringing the designated inflationary 2% target of the US Federal Reserve more into focus.
The G7 summit in Japan closed last Friday with all its primary members emphatically stating that they would now utilize all their resources to boost global demand by minimizing international trading constrictions. Shinzo Abe, the Japanese Prime Minister who chaired the meeting, advised that the world’s economic growth was still in a fragile state with the threat of recession constantly looming. Specifically, he compared present conditions to those of the 2008 financial crisis following the collapse of Lehman Brothers. He then advised that G7 members had consequently concluded that a precarious crisis unquestionably existed especially after assessing the unstable economies of the emerging nations.
Oil prices extended their rally last week by breaking above their psychologically mark of $50 per barrel for the first time since the autumn of 2016. This significant rebound was primarily fueled by Nigerian military concerns and the devastating Canadian wildfires which severely disrupted supplies from both these major producers. Nevertheless, prominent analysts are now predicting a period of consolidation as a direct consequence of further imminent interest rate hikes by the US Federal Reserve.
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What to Expect This Week
There will be a high volume of major global economic releases throughout this week climaxing in the publication of the vital US labor report on Friday.
The Eurozone will launch Monday by presenting a key ‘Business Sentiment Index’ which should again hover about its 104 mark. Japan will then disclose its ‘Industrial Production’ figure for April which should extend recent growth of 3.6%.
On Tuesday, Italy is scheduled to reveal major inflationary data for last month and the second sighting of its ‘Gross Domestic Product (GDP)’ for the first quarter of 2016. The Consumer Price Index (CPI) should rebound from its prior dismay showing of -0.1% while the GDP should be revised upwards from its initial 0.3%. Later, Canada will post its own GDP with analysts seeking an improvement on 0.2%. The USA will then publish its ‘Personal Income and Outlays (PIO)’ for April which the US Federal Reserve will use to assess if inflation is now advancing towards its designated target of 2%. Australia will next issue its own GDP which should linger about its 0.6% handle. Japan will complete the session by releasing its latest ‘Purchasing Managers’ Index (PMI) figure for manufacturing which is forecasted to register further contraction.
The Eurozone will deliver a spate of crucial inflationary indicators on Wednesday which should reside about their ‘Expansion/Contraction’ level of 50. The US Institute of Supply will then declare its respected ‘Manufacturing Index’ which should record progress by beating April’s 50.8. Australia will terminate the day by proclaiming its ‘Retail Sales’ for last Month which should exceed its prior print of 0.4%.
On Thursday, the European Central Bank will announce its latest interest rate decision will should remain unchanged. Later the USA will provide its ‘Jobless Claims’ for last week verifying that between 250k and 290k new applications were filed during that period. Finally, Japan will proclaim its PMI for April which should validate that a worrisome state of deflation continues to dominate.
The Eurozone will commence Friday by presenting another string of vital inflationary indicators. French PMI should beat 50.2; German PMI should surpass 53.6 which European PMI should hit 53.0. The United Kingdom will next disclose its Services PMI for May with expert consensus favoring a 53+ outcome. The USA will curtail the week by releasing its all-prevailing labor report and ‘International Trade’ for May. US employers are expected to have created about 200,000 new jobs last month while the latter parameter is expected to register growth by rebounding from its previous weak reading of -$40.4 billion.
