Week in ReviewThe stock markets recommenced trading last Friday following the Christmas holiday break. They succeeded in rising in value once again resulting in a number of key US indices recording a second consecutive week of gains. Equites have been pushing constantly higher ever since the US Federal Reserve adopted a more hawkish tone earlier during this month. Basically, the US Central Bank assertively advised that it could instigate an interest rate hike earlier than expected especially if US economic data continue to surprise to the upside. The major US indices crept higher last Friday exemplified by the Dow Jones Industrial Average surging by just over 52 points; the S&P500 climbing by nearly 10 points and the NASDAQ rising by almost 18 points.
One of the major catalysts driving the financial markets during the latter part of this year has undoubtedly been the significant decline in oil prices. The primary factors attributing to this phenomenon have been a global crude glut; overproduction and a strengthening US Dollar. After experiencing constant losses during recent months, oil succeeded in staging a corrective rally towards the end of last week. This bullish movement was caused primarily by increasing anxiety concerning Libyan oil supplies which overshadowed the bearish impacts of excessive US stockpiles and a slump in Japanese consumption.
News emerged during last week that increasing geopolitical tensions in Libya were now posing a serious threat to this nation’s crude production. Prominent analysts summarized the significance of this development by warning that fresh military initiatives were now targeting the control of key oil resources. They further added that should this strategy prevail then it will only amplify concerns about the reliability of future Libyan supplies.
The faltering health of the Russian economy also attracted attention late last week when Vladimir Putin, the Russian President, announced that all Kremlin holiday leave was cancelled during the short-term. He added that this policy was required in order to provide sufficient resources and effort to counter a significant deterioration in the national economy. Declining oil prices and Western sanctions are beginning to exert so much pressure on Russia that analysts are now forecasting that this major trading region will enter a new recession during 2015.
Specifically, the Rouble suffered severely during December by crashing in value against the US Dollar. In addition, sanctions imposed by the USA and the Eurozone over the Ukrainian crisis are now prompting investors to flee Russia in droves. In attempts to counter such problems, the Kremlin has recently instigated policies to support the nation’s major banks as well countering a currency freefall.
What to Expect This Week
The subsequent global economic data will be published this week. No indicators are scheduled for release on Monday.
On Tuesday, the USA will post a key Consumer Confidence index for December. Growth is presently the favored outcome especially after the release of impressive economic data by the USA recently.
Australia will launch Wednesday by disclosing its Private Sector Credit for this month, which is expected to falter after recording two months of consecutive gains. Next, China will reveal its Manufacturing PMI for December. A value below 50 is forecasted which will provide further evidence that the China has entered a new recession, if confirmed. Later in the session, the USA will present its Pending Home Sales for November. This key housing statistic should strengthen this time around by reversing a recent bout of poor results.
No major data will be declared on Thursday, which is New Year’s Day.
The Eurozone will issue its Manufacturing PMI for December on Friday. A poor showing will exert further pressure on the struggling euro. The United Kingdom will then announce its own Manufacturing PMI for this month, which is expected to extend its gains for the third successive month. Finally, the USA will complete the week by proclaiming the same economic indicator for December. The result could provide important insights into the pending release of the vitally important US labor report, next week.