Week in Review

Global equities trended water last Friday by practically trading within confined horizontal channels. Nevertheless, the Dow Jones Industrial Average and the S&P500 still succeeded in edging higher to register new historic closing highs. The publication of a mixed bag of global economic indicators towards the end of last week provided investors with little incentive to push stocks in either a bullish or bearish direction.  Consequently, the topmost US indices generated a lukewarm reaction to all this indecision exemplified by the Dow Jones Industrial Average climbing higher by nearly 20 points; the S&P500 inching upwards by 4 points but the NASDAQ slipping by just over 5 points.

The USA posted a number of key economic indicators last Friday. For example, consumer spending slumped during April to register its first monthly decline in almost twelve months. However, this disappointing result was not so bad as to divert the growing speculation that the US economy will rebound positively during the second quarter of 2014.  Investor confidence took a further hit after a key index revealed that inflation had surged faster than at any time in the last 1.5 years. On a more positive note, another release disclosed that factory activity in the Mid-West had risen at its fastest rate since the autumn of 2013.

These confusing signals unquestionably failed to provide traders with any clear directional bias. Prominent analysts summarized this indecision by advising that bullish aspirations were definitely capped while bears were also not provided with sufficient justification to support their ambitions.  They also added that basically investors opted to adopt a more cautious tone ahead of critical events that are scheduled to occur later this coming week.

For instance, the European Central Bank is on the brink of instigating new monetary easing measures in order to boost the fragile European economic recovery. In addition, the USA will post its vitally important labor reports on Friday which should provide valuable insights into the current status of this key economic sector. The significance of this second event cannot be understated as the US Federal Reserve will analyze the released figures very carefully in to order to determine its future policies decisions.  For example, will the published figures force the Fed to alter its present tapering program?

The US Dollar finished last week on a declining note by sliding against a basketful of other major currencies. The greenback was subjected to a moderate level of pressure amid month-end activity and growing conjecture concerning the outcome of ECB meeting later this week.

What to Expect This Week

Numerous key economic indicators will be released globally during the course of the coming days. The most significant ones are as follows:

Japan will present its Capital Spending figure for its first quarter during Sunday evening. The significance of this indicator is boosted this time around by the potential impacts of a recent sales tax hike on the future policy decisions of the Bank of Japan.

China will issue the final revision of its Manufacturing PMI on Monday which could bolster investor sentiment if it crawls back into expansionary territory. Next, Great Britain will disclose its Mortgage Approvals which is predicted to decline from the prior 67.1k to 64.5k. Later, the US Institute of Supply Management will reveal its Manufacturing PMI. The present growth trend, which has now been active since the middle of 2013, is expected to continue during last month.

On Tuesday, Australia will announce its Retail Sales which is forecasted to rebound from its previous anemic reading of 0.1%. The Reserve Bank of Australia (RBA) will also deliver its Interest Rate verdict supported by an accompanying statement. The RSA is expected to maintain its current posture by not initiating any new changes. The British House prices will next be advised which should confirm a strong healthy growth of 10.9% on an annual basis. The Eurozone is then scheduled to release its CPI estimate for May, which should register an inflation rate of 0.6% compared to the prior 0.7% in April. The European Unemployment figure will also be presented for April verifying a steady rate of 11.8%.

Australia will post its Gross Domestic Product on Wednesday and analysts are hopeful for a positive result. The final European PMI reading for May should register no change. The British Services PMI for May is expected to slip from its prior 59.2 to 58.7 during May. The Eurozone second revision for its Q! Gross Domestic Product should remain unchanged at 0.2%. The USA will subsequently publish a labor report for its private sector which could provide valuable insights into Friday’s NFP release. The US non-manufacturing PMI should disclose a gradual improvement.

The European Retail Sales for May will be advised on Thursday, which is forecasted to remain flat. Next, the Bank of England will declare its important interest rate decision, which is also expected to remain unchanged.

The highly anticipated interest rate decision by the ECB will occur on Friday. Cuts in both deposit and interest rates are predicted together with an instigation of new stimulus measures. Another pivotal weekly event will then take place when the USA announces its all-prevailing Non-Farm Payroll figure and unemployment rate. The former should hit the 200k mark while the latter should remain unchanged.

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