Week in Review

With the financial markets experiencing low volumes, European stocks slipped last Friday while those of the USA recorded final daily gains after paring earlier losses. Escalating concerns about military action within both the Ukraine and Iraq plagued European investors over recent days prompting them to drive equities lower by posting their first weekly loss in almost two months. Despite the USA publishing a relatively strong economic indicator, doubts still persist over the true health of its economic recovery. The major US indices registered small gains last Friday typified by the Dow Jones Industrial Average inching upwards by nearly 6 points; the S&P500 rising by almost 4 points and the NASDAQ climbing by 19 points.

The USA issued data towards the end of last week disclosing that consumer sentiment that increased during June at a faster rate than anticipated by surpassing analysts’ expectations. A print of 82.5 was posted compared to the forecasted 81.9 which registered a definite improvement over May’s reading of 81.2. However, this impressive result still did not quell the growing speculation that the US economy was not faring as well as previously forecasted and that it may now generate just a disappointing growth rate for the second quarter of 2014.

This new conjecture came to the fore last week following the release of a spate of worrisome key parameters revealing a disappointing final Gross Domestic Product for the first quarter of 2014 and a very weak consumer spending figure. The US Dollar subsequently felt the backlash of these dismal results by recording a second consecutive week of losses against a basketful of other major currencies. However, although US stocks plunged during the earlier part of last Friday’s session, they rallied strongly towards market close supported by technological giants, such as Apple, posting impressive gains.

Prominent analysts summarized last week’s developments by advising that equities may now have reached overbought levels. Consequently, investors will experience increasing difficulties supporting further rises unless a major bullish catalyst emerges. They expect traders to consequently adopt a more cautious tone ahead of the new corporate earnings season which is scheduled to commence in two weeks’ time. The ensuing results, generated during the second quarter of 2104, could supply more tangible evidence about the real state of the US economy.

Europe is also experiencing difficulties primarily emulating from the crises in Iraq and the Ukraine. Specifically, the region’s leading index registered its first weekly loss in over 2.5 months. The primary world stock index also posted a weekly loss of 0.3% last Friday.

What to Expect This Week

A bout of key global economic indicators is scheduled for publication over the course of the coming days.

Europe will start the ball rolling by presenting key consumer price indices on Monday. Analysts are predicting that these indicators will demonstrate that deflation is still a major issue for the European Central Bank. Canada will then disclose its monthly Gross Domestic Product and investors will be seeking an improvement over last month’s 0.1%. Later in the session, Japan will issue a key economic performance survey, which is expected to post a decline from May’s result of 17. This nation is also scheduled to reveal a major Purchasing Managers’ Manufacturing Index (PMI) shortly afterwards.

France and Germany will launch the new month by announcing their PMIs early on Tuesday. Investors will be seeking evidence verifying that the economy of the Eurozone is starting to acquire real traction. Next the USA will post its ISM manufacturing composite index which is forecasted to expand from May’s 55.4 to 55.6 in June.

On Wednesday, Great Britain will publish key house price information produced by Nationwide. This figure could provide insights into the housing bubble problem stressed in a speech presented last week by Mark Carney, the Governor of the Bank of England. The UK will also issue its Construction PMI. Traders are keen to compare the printed result against last month’s reading of 60. Japan and Australia will subsequently end the session by presenting their respective Composite PMI and Retail Sales parameters.

Thursday is a busy day. The Eurozone will commence proceedings by displaying PMI Composite figures for France, Germany and the entire region. Positive reads are required otherwise European stocks and the euro could suffer sizeable losses. The United Kingdom will then declare its PMI Service Index. Many pundits are predicting an increase from May’s 58.6. Later, the European Central Bank will state its latest monetary easing policies and forward guidance for future interest rate movements. No major changes are expected this time around after June’s dramatic developments.

The USA will subsequently post a spate of economic indicators including its International Trade figure and Jobless Claims number for the previous week. Most importantly, the eagerly awaited US Non-Farm Payroll and Unemployment rate will also be announced. The former is predicted to show that 211,000 jobs were created by US employers during June compared to the previous month’s 217,000.

Finally, the US markets are closed on Friday for its 4th July celebration.

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