Week in Review

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The stock markets enjoyed a strong finish to last week by rallying strongly typified by both the Dow Jones Industrial Average and the S&P500 hitting new record highs. The major catalysts prompting equities to surge higher were the European Central Bank cutting its interest rates to new historic lows last Thursday and the USA published a robust labor report on Friday that supported the bullish viewpoint that the national labor market was definitely on the mend. As such, the leading US indices responded positively epitomized by the Dow Jones Industrial Average surging upwards by almost 90 points; the S&P500 climbing by nearly 9 points and the NASDAQ jumping higher by 25 points.

The US Department of Labor issued its eagerly awaited labor report last Friday disclosing that American employers had created a solid 217,000 new jobs during May and that the unemployment rate had remained unchanged at 6.3%. The results were well received by investors as they confirmed the morale-boosting fact that the 8.7 million jobs, lost as a result of the 2007/2008 financial crisis, have now been fully recovered.

Prominent analysts advised after studying the report in depth that although the figures merely complied with economists’ expectations, they still verified that the US economy was gaining traction and advancing in the correct direction. In addition, they stated that the results should provide sufficient justification for the US Federal Reserve to proceed with its present course of action. As such, they now expect the Fed to continue reducing its influential monthly asset purchasing program in accordance with its current tapering policies.

The European Central Bank did not frustrate investors last week as it instigated new stimulus measures, as anticipated, with the prime objective of addressing deflation. In particular, the ECB sliced its main interest rate from its present 0.25% to 0.15%. More contentiously, the central bank also imposed a negative deposit rate of 0.10% with the key intent to prompt financial institutions within the Eurozone to enhance their lending activities.

Many economic strategists advised that the ECB decisions had successfully countered their prime concern that global equities were presently overpriced. Such conclusions certainly boosted the stock markets towards the end of last week resulting in a number of the topmost US indices recording a sequence of record highs. Specifically, investors opted to increase their risk appetite after the European Central Bank pledge to significantly enhance the flow of cheap euros in order to bolster the fragile economic recovery of the Eurozone as well as suppressing the dangers of deflation.

What to Expect This Week

The world’s leading nations are scheduled to publish a bout of important economic indicators during the course of this week.

After a quiet Monday, Great Britain will launch proceedings by revealing its Industrial and Manufacturing figures on Tuesday, which are predicted to rebound positively in April after a worrisome plunge recorded in March.

The United Kingdom will also commence Wednesday by presenting its Unemployment Rate and Claimant Count Change. Analysts are expecting that these figures will enhance the strong bullish trend registered over the last 12 months. Later in the session, the Reserve Bank of New Zealand (RBNZ) is scheduled to announce its interest rate policy verdict supported by a subsequent press conference. Expert consensus is currently split about whether the RBNZ will continue to support it recent rate tightening strategy.

Australia will present its Unemployment Rate and Labor Changes on Thursday. Many consultants are forecasting disappointing results this time round after three consecutive months of positive readings. The Eurozone will then reveal its Industrial Production number for April which is predicted to reverse the previous month’s dismal performance. Later in the day, the USA will post its key Retail Sales economic indicator. After a worrisome set of depressing results registered during the first quarter of 2014, investors will be keen to learn whether this release will verify that those prior weaknesses had been correctly attributed to an extremely bad North American winter.

On Friday, the Bank of Japan will disclose its Monetary Policy Decision. No changes are predicted because the bank may still need more time to analyze recent important changes and events. China will subsequently publish its Industrial Production which should support a minor improvement. The Eurozone will then post its Trade Balance for April, which should reveal a retraction from March’s figure. The currency bloc will also issue its Employment Change parameter for its first quarter, which is expected to record a minor improvement. Canada is then scheduled to disclose its Manufacturing Sales and analysts are forecasting an increase of 0.9%. The USA will conclude the week by publishing its Producer Price Index and an important Consumer Sentiment Index. The former should confirm a positive trend while economists are hoping that a significant recent improvement in weather conditions will substantially bolster consumer confidence and risk appetite.

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