Week in Review

Despite geopolitical events continuing to dominate the financial markets towards the end of last week, equities still succeeded in stabilizing after suffering two consecutive days of sizable losses. The Iraqi crisis took a decidedly turn for the worst following a full-scale call to arms by a prominent Muslim cleric inciting citizens to defend the present government of President Nuri al-Maliki from Sunni militant rebels. The USA posted another insipid economic indicator last Friday enhancing growing skepticism about the true health of its economy. Nonetheless, the foremost US indices managed to instigate a minor rally last Friday exemplified by the Dow Jones Industrial Average climbing by just over 40 points; the S&P500 inching higher by 6 points and the NASDAQ creeping upwards by nearly 14 points.

The conflict in Iraq definitely started to dominate proceedings late last week, as intensifying military action began to threaten civil war which could even lead to the entire disintegration of this nation. The seriousness of the situation became quite evident after Barrack Obama, the US President, stressed that numerous military options were presently under urgent review. Although he emphasized that deploying American troops within Iraq was definitely NOT an option, he proceeded to advise that various solutions were currently under debate about how best to assist the current Iraqi administration in countering rebel insurgency. However, he clearly stated that any US support must be backed by strong Iraqi efforts to resolve its own internal issues.

In a dramatic intervention, Ali al-Sistani, the Grand Ayatollah, made an assertive plea to the Iraqi people to counter the rapid progress of rebel forces. Military insurgent units are already advancing towards Baghdad, the Iraqi capital, with the ominous threat of disrupting the vitally important oil fields located within the south of the country.

The US Labor Department published a key economic indicator last Friday disclosing that producer prices had slumped during May after experiencing two consecutive monthly gains. Specifically, this index slide by 0.2% in May following increases of 0.5% in March and 0.6% in April. This decline was primarily caused by a weakening demand for goods and services.

Elsewhere, Italy presented a key inflation index demonstrating that consumer prices dropped during May. A report released last Friday revealed that CPI declined to -0.1% from the +0.2% posted in April. However, this data release produced little market movement as it complied exactly with the expectations of most leading economists.

What To Expect This Week

A spate of important global economic indicators will be published during this week.

The Eurozone will initiate proceedings by presenting its Consumer Price Index on Monday. This result is expected to provide deeper insights into why the European Central Bank recently cut its interest rates.

On Tuesday, the Reserve Bank of Australia will deliver the minutes from its last policy meeting. As little changes were instigated by this event, this document should not reveal any new earth-shattering information. Europe and Germany will then disclose their economic sentiment surveys. These figures are predicted to confirm growing dissatisfaction with the economic performances of these regions. Later in the session, the USA is scheduled to issue its Building Permits and Housing Starts as well as its Consumer Price index. Investors will be keen to learn if the former will confirmed a steady improvement in the vital housing sector while the latter should register a result ranging between 1.5% and 2%.

The Bank of England (BoE) will launch Wednesday by displaying the minutes from its latest monthly meeting. This report could provide vital clues about when the BoE will most likely instigate its first interest rate hike.  The pivotal events of the week will then occur when the US Federal Reserve announces its interest rate and policy decisions supported by a subsequent press conference. Expert consensus is forecasting that the Fed will stick with its present tapering policies. New Zealand will post its Gross Domestic Product figure for the first quarter of 2014 later in the day. The prevailing growth trend is expected to be extended once more this time around.

On Thursday, Great Britain will publish its retails sales which should record a decline following three successive months of increases.

The Governor of Japan, Haruhiko Kuroda, will kick-off Friday by delivering a keenly anticipated speech. He is expected to counter escalating conjecture that the Bank of Japan is presently contemplating an exit route from its current quantitative easing program. Canada will complete the week by releasing its Retail Sales for April. If a negative result is posted for the second consecutive month, then it could influence the present monetary easing policies of the Bank of Canada.

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