Major Events of Last Week
Many investors were glad to see the back of July as it was ravaged by brutal sell-offs in the Chinese and Commodity markets. The month was also subjected to persistent upheavals created by the Greek debt crisis and escalating speculation about when exactly the US Federal Reserve will instigate its first interest hike in practically 10 years. The USA completed last week by publishing economic data which surprised analysts by missing their expectations. The major US indices generated mixed reactions to these developments last Friday exemplified by the Dow Jones Industrial Average plummeting by just over 50 points; the S&P500 falling by almost 3 points but the NASDAQ climbing by nearly 6 points.
The true health of the global economic recovery came sharply into focus during July epitomized by both the commodity and Chinese markets experiencing vicious slumps. Although Chinese equities crashed to record their largest declines in nearly six years, economists nevertheless fear that the worst is still to come after another bout of significant weakness was registered last Friday. Key commodities, such as gold, copper and oil, also plunged to record multi-year lows as last month drew to a close.
Greek debt negotiations were one of the prime catalysts dominating the directional movements of the markets throughout July. Although, the production of a third bailout package now appears to be imminent, analysts are still advising caution especially as the probability for new surprises still remains comfortably high. For example, investors were stunned late last week when the International Monetary Fund (IMF) advised that it would not participate in the initial discussions of a fresh Greek debt deal.
Without question, economists will keep a firm eye on the Chinese markets as August begins to unfold. They will be particularly keen to discover if the bearish trends recently unleashed can be successfully controlled. The sheer scale of the problem can be vividly comprehended by appreciating that the leading Chinese indices nose-dived by nearly 14%, on average, last month.
The USA published a key labor statistic last Friday disclosing that US labor expenses grew at their slowest rate in 33 years during the second quarter of 2015. This worrisome result immediately increased conjecture that it could now prompt the US Federal Reserve into delaying its first interest rate hike in almost a decade. However, after studying the details carefully, analysts were quick to advise that such an eventuality remained very likely since the underlying trend of the US labor market remains solidly bullish. Consequently, they concluded that this disappointing parameter will not sway the Fed for its current path.
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What to Expect This Week
China will commence the action by declaring the final reading of its Manufacturing Purchasing Managers’ Index (PMI) for July on Monday. Investors are hoping for a rebound to 48.2 after the initial reading crashed to 48.2. Later, Great Britain will present its own Manufacturing PMI for last month, which is forecasted to register a slight recover from 51.4 (June) to 51.6. The USA will complete the session by disclosing its Manufacturing PMI for July which should extend recent monthly gains by climbing to 53.5.
On Tuesday, Australia will reveal its Retail Sales and Trade Balance for June. The former is predicted to have grown by 0.4% while the trade deficit is expected to have increased by almost 3.0 billion AUD. The Reserve Bank of Australia (RBA) will then announce its latest policy decisions, supported by a press conference. Despite economists anticipating no major changes or surprises, they will still carefully analyze the release of any subsequent RBA statements for any hawkish undertones.
The USA will publish the ADP jobs report for its private sector on Wednesday. Investors will study this information diligently with the intent of gleaning any insights to the vitally important release of the Non-Farm Payrolls (NFP) on Friday. Private employees are forecasted to have created about 210,000 new jobs last month. The USA will later issue its Trade Figures for June. Prominent economists are predicting that the US trade deficit expanded moderately during that month from $41.87 billion to $42.25 billion.
Australia will launch Thursday by posting its Labor Force Survey for July. Favored forecasts include the unemployment rate inching higher from 6.0% to 6.1%; the generation of about 10,000 new jobs last month and the participation rate stabilizing at 64.8%. The Bank of England (BoE) is then scheduled to deliver its latest policy decision later in the day. As a ‘no change’ verdict is widely expected, this announcement could well be a ‘non-affair’ this time around. Finally, the USA will proclaim the number of Americans filing first claims for unemployment benefits last week. This figure should remain steady about the 270,000 mark.
Friday will provide the pivotal event of the week when the USA releases its all-prevailing Non-Farm Payroll figure for July. This result will be keenly awaited by all market participants as it could supply major clues into when precisely the US Federal Reserve will implement its first interest rate hike in almost 10 years. Analysts are presently predicting that US employers produced 225,000 new jobs during July; a stable ‘unemployment rate’ of 5.3% and an ‘hourly earnings increase’ of 2.0% on a monthly basis.
