Major Events of Last Week
Growing optimism that Greece and its international creditors could soon produce a resolution to its debt crisis helped the global financial markets stabilize last Friday. Specifically, key Eurozone leaders tabled an enticing proposal that would supply badly-needed financial aid to Greece capable of preventing it from defaulting on its debt obligations and exiting the Eurozone. The USA published a key economic indicator at the end of last week disclosing that consumer confidence improved during May by a larger margin than previously advised. The leading US indices produced a mixed response to these events last Friday illustrated by the Dow Jones Industrial Average surging higher by nearly 57 points; the S&P500 falling by almost 1 point and the NASDAQ dropping by just over 30 points.
At the end of a frustrating and anxious week, investor sentiment was boosted by news that a meaningful solution to the Greek debt crisis was now a viable possibility. Consequently, Athens is subsequently on the brink of obtaining a new 15.5 billion euro loan from the International Monetary Fund (IMF) and European Union (EU). Such a facility would be supplied in four equal installments and will provide Greece with sufficient aid to survive until the end of November.
Previous to this announcement, global equities had declined constantly during the course of last weeks amid fears that a Greek debt default could generate an unprecedented crisis within the Eurozone. Investors were particularly concerned about a domino effect whereby Greek contagion could spread rapidly throughout other debt-stricken member nations, such as Italy, Spain, Portugal and Ireland. Prominent analysts summarized this precarious situation by concluding that the proposed deal should definitely counter such a nightmare scenario.
Prospects of an early interest rate hike by the US Federal Reserve received a boost late last week after the USA published a primary consumer confidence index for May which exceeded analysts’ expectations. This important indicator, prepared jointly by the University of Michigan and Reuters, recorded a final value of 96.1 compared to its initial reading of 94.6. This outcome provided additional proof that the US economic recovery was unquestionably gaining traction after expectedly contracting during the first quarter of 2014.
The combined impacts of the inspiring Greek development and the release of encouraging US economic data helped the financial markets stabilize at the end of a stressful week. Economists explained that investors had desperately been seeking any good news especially after Greek debt negotiations completely collapsed last Thursday and the Greek Prime Minister, Alexis Tsipras, had then vehemently accused his nation’s international creditors of blackmail.
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What to Expect This Week
On Monday, Great Britain will disclose its latest Credit and Mortgage data which should confirm a strong lending trend. The Eurozone will then present key Confidence Indices for its business, consumer, service and economic sectors. Better-than-expected results could provide the besieged euro with a much needed respite. The USA will complete the session by revealing its Pending Home Sales for May. Economists expect that this parameter will confirm that the important US housing segment is undoubtedly on the mend.
The United Kingdom (UK) will post the final revision of its Gross Domestic Product (GDP) for the first quarter of 2015 on Tuesday. As this figure should remain unchanged by validating growth of 0.4%; this release could well be a non-event. The Eurozone will next publish its unemployment rate for last month, which should remain steady at 11.1%. This region will also supply the first sighting of its Consumer Price Index (CPI) for June which is expected to strengthen for the second consecutive month by recording an increase of 0.2%. Later, the European Central Bank (ECB) will issue the minutes from its latest monthly policy meeting. Investors will be keen to discover if this document exposes any signs of dissatisfaction with the current ECB quantitative easing program.
Also on Tuesday, the USA will supply its Chicago Purchasing Manager’s Index (PMI) for this month. Analysts are hoping for a rebound back into expansive territory after May’s dismal showing. Japan will finish the day by proclaiming its Tankan index for the second quarter of 2015. This industrial confidence gauge should register its largest increase in almost 12 months by jumping from 10 to 14.
The United Kingdom will launch Wednesday by announcing its Manufacturing PMI for last month. The current preferred prediction is a minor rise from 52.0 to 52.4. The USA will then deliver its ADP employment change, which should verify that US employers, within the private sector, created 210,000 new jobs during June. Later, the USA will present its Institute of Supply Management (ISM) manufacturing indicator for last month which is predicted to climb from its prior reading of 52.8 to 53.1. A greater inflationary increase will bolster the US Dollar.
Thursday will provide the pivotal event of the week when the USA is scheduled to publish its all-prevailing labor report for June. In particular, Non-Farm Payrolls (NFP) is forecasted to confirm that US employers generated 230k+ new jobs during June compared to the stellar performance of 280k in May.
The UK will release its Services PMI for June on Friday which should post impressive growth from 56.5 to 57.5. Finally, the Eurozone is predicted to validate that its Retail Sales recorded a moderate rise of 0.1% during May.
