Major Events of Last Week
The surprise murder of Jo Cox, a British parliamentary member, last Thursday incited the British government to immediately suspend all Brexit campaigning in honor of her memory. This dramatic action had an immediate impact on the financial markets by instigating a substantial rebound in global risk appetite enabling equities to pare their earlier substantial losses. Prominent analysts summarized the significance of this development by stating, that prior to this worrisome incident, global risk sentiment had experienced a serious meltdown causing many major asset classes to register sizeable losses. However, just rumors, suggesting that next week’s Brexit referendum may be delayed, were sufficient to reduce investor stress sparking a notable bullish correction.
Earlier in the week, the US Federal Reserve adopted a dovish stance by refraining to hike interest rates but trimming its rate path projections. Essentially, the Fed now opines that the US economy is steadily expanding, albeit at a very modest pace, epitomized by the national unemployment rate about 4.7%; growth near 2% and inflation gradually nudging towards its designated target of 2%. Consequently, the US Central Bank projected a flatter hiking profile which should result in the Federal Funds Rate hovering about 0.65% within 2.5 years.
After sustaining seven straight days of losses, oil prices staged a significant recovery last Friday by rebounding almost 4% during the session. Experts advised that the primary catalyst, presently driving the directional movements of crude, was the looming Brexit referendum, scheduled to take place next Thursday. Consequently, last week’s late rally was partially underpinned by a potential Brexit delay following the murder of a British member of parliament. Investors, opting to reduce their oil short positions amid excessive volatility, also helped drive oil’s upward trajectory.
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What to Expect This Week
The Bank of Japan (BoJ) will launch proceedings by presenting the minutes from its latest monetary policy meeting on Monday. Economists will study this document very carefully in order to glean any new insights into whether the BoJ is currently assessing the merits of instigating additional stimulus measures within the imminent future.
No major global events or data releases are scheduled for Tuesday.
On Wednesday, the Eurozone will disclose a major ‘Business Sentiment Index’ for May which is forecasted to hover about its 105.0 mark. Later, Canada will reveal its ‘Retail Sales’ figure for last month. This parameter needs to register a significant rebound from its prior disappointing print of -1.0% in order to confirm that the Canadian consumer is acquiring new belief in the national economy. The USA will complete the day by issuing a key statistic from its crucial housing sector. ‘Existing Homes Sales’ is expected to deliver good news by surpassing April’s result of 5.450 million units sold.
The Eurozone will release the first sighting of a spate of May inflationary data on Thursday. French Purchasing Managers’ Index (PMI) should confirm further growth by surpassing its key 50 mark; Germany PMI should extend recent gains by climbing above 55 while European PMI should reside about its 53 level. The USA will next post prominent unemployment and housing indicators. Jobless Claims should verify that about 175,000 Americans filed new claims for unemployment benefits during the prior week ending 19th June. If ‘New Home Sales’ can beat its 620k mark, then such an outcome will provide fresh proof that this critical sector is beginning to emerge from the mire. A crucially important event, that will also occur throughout the day, will be the Brexit referendum which will decide whether or not the United Kingdom will remain a member of the European Union.
On Friday, Germany will publish a prominent Business Confidence Index which is predicted to deliver a positive reading by exceeding its 105.0 level. Finally, the USA will close the week by posting its ‘Durable Goods Orders (DGO)’ for May. Investors will be seeking for a value above 3.5% in order to rectify that the US manufacturing sector is starting to acquire new impetus.
