Major Events of Last Week
Perhaps, the most significant event influencing global equities last week originated in Japan. After a major report advised that the Bank of Japan was on the brink of activating new quantitative easing measures, the Yen plunged dramatically by falling over 1% against a basketful of other major currencies. Specifically, the BoJ is considering the application of negative interest rates to its two primary lending facilities, which are long-term bank funds and loans to firms operating within its high-growth sector. As such, analysts are now advising that next week’s BoJ meeting could well be a more dramatic and significant affair than previously envisaged.
Investor confidence in commodities, in general, and oil, in particular, rose substantially as last week progressed. By increasing their risk appetite during this period, traders eventually helped crude prices break above $45 per barrel for the first time during 2016. However, economists then stressed the need for caution after concluding that, although there was still more room for growth, such bullish activity would not be underpinned by fundamentals. They also added that investors should not be seduced by these ‘new birth’ signs as they could be premature but, in contrast, should continue to assess the overall picture in its entirety.
The Greek debt crisis encountered new problems last week after Athens, the International Money Fund (IMF) and Eurozone lenders struggled to define and agree a financial fund which is capable of servicing the present deficiencies of Greek pension, income tax and bad loan requirements. Official spokespersons advised that no imminent deal was on the table despite significant progress being achieved. Christine Lagarde, the IMF Director, endorsed these statements by stressing that more work was still needed to create reforms capable of generating a Greek GDP of 3.5% by 2018.
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What to Expect This Week
Germany will launch proceedings by presenting a key business survey on Monday. Economists are hoping for a good showing as it will underline a solid Eurozone GDP for the first quarter of 2016.
On Tuesday, the USA will declare its ‘Durable Goods Orders’ for March which is expected to rebound from its prior dismal reading of -2.8%. Such a result is needed in order to confirm that the beleaguered US manufacturing sector is starting to emerge from the mire. Later, Australia will disclose its ‘Consumer Price Index’ (CPI) for last month which should again hover about its 0.4% mark.
Great Britain will commence Wednesday by revealing its GDP for the first quarter of 2016. If this key indicator can surpass its 0.6% prediction, then Sterling should receive a significant boost. A major event will then occur during the afternoon, EST, when the US Federal Reserve will announce its latest interest rate decision and forward guidance policies. Although a ‘no-change’ verdict is the favored outcome, investors will still be keen to glean any new insights into just how many rate hikes the Fed plans to implement this year. Japan will complete the session by releasing its CPI and ‘Industrial Production’ numbers for March. The former should reside about 0.1% while the latter should rally from February’s disappointing – 6.2%.
On Thursday, the United Kingdom will post a key housing statistic which should extend its recent growth by an additional 0.8%. The Eurozone will then issue a prominent ‘Economic Sentiment Index’ which is anticipated to rise to 103. A weaker outcome will provide the European Central Bank with more incentive to activate further stimulus measures later this year. Next, the USA is scheduled to publish its GDP for Q1 of 2016 and ‘Jobless Claims’ for last week. Current GDP expectations are for an insipid 1.4% while the number of Americans filing first claims for unemployment benefits during the prior week should remain near a multi-year low. Australia will terminate the day by announcing its Producer Price Index (PPI) for March. The Australian dollar could come under pressure if a print below 0.3% is delivered.
The Eurozone will broadcast a spate of important inflationary indicators on Friday. Stronger-than-expected figures would provide proof that the latest ECB monetary easing policies are beginning to bear fruit. The USA will finally bring the week to a close by revealing its ‘Personal Income and Outlays’ for last month. The Fed will be eager for an improvement from the previous worrisome 0.2% result as it uses this parameter as one of its primary tools for devising future guidance policies.
