Major Events of Last Week

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Global equities registered their fifth consecutive week of gains last Friday exemplified by the Dow Jones Industrial Index paring all its 2016’s losses enabling it to break back into positive territory. The primary catalysts driving this bullish advance were US Dollar weakness; rebounding oil prices and the US Federal Reserve adopting a more dovish stance. Prominent analysts advised that the new investor euphoria could mainly be attributed to the Fed reducing market tension by trimming its forward guidance policies. The leading US indices rallied last Friday typified by the Dow Jones Industrial Average climbing almost 115 points; the S&P500 rising by 10 points and the NASDAQ edging higher by nearly 23 points.

The US Federal Reserve definitely surprised traders last Wednesday when it unexpectedly revised its forecasts for additional 2016 interest rate hikes lower from four to two. This distinctly dovish action had the immediate impacts of sparking a new stock market rally and prompting the US Dollar to weaken dramatically across the board against other major currencies. Specifically, new Fed caution should now incite traders to carefully scrutinize all future global geopolitical developments in order to assess their impacts on both the US labor market and economic growth. The European Central Bank (ECB) added to the party spirit by advising that it was now ready to instigate additional monetary easing policies within the imminent future, if needs arise.

Possibly, the major story of last week was the continual rally in oil prices, which recorded their highest values this year by surging from lows of $26 per barrel to over $42 per barrel. This commodity extended its gains for the fourth straight week in a row inspired by growing expectations of reduced global production, a weakening US Dollar and increasing seasonal demand. The recent dramatic declines in oil prices have now been unequivocally reversed by an idea introduced by the Organization of the Petroleum Exporting Countries (OPEC) advising that all major producing countries should curtail their production levels as soon as possible.

Many commodity experts are subsequently promoting the viewpoint that they have concluded that the current surge in oil prices still has more legroom for growth. In addition, they advise that the world is now advancing into a new era of appreciating oil prices following an extensive period of suppressed demand. They also stressed that the extensive crude stockpiles, which initiated the massive slump during 2015, are now starting to gradually recede. The next major event, that will underpin this desirable scenario, is a prominent meeting, scheduled for April, when key oil producers, such as Russia and Saudi Arabia, are expected to produce their first oil supply agreement in nearly 15 years.

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What to Expect This Week

No major events or data releases are scheduled for Monday.

On Tuesday, the Eurozone will present a spate of leading inflationary indicators which should confirm that the region’s economy continues to expand, albeit at a modest pace. The Purchasing Managers’ Indices (PMI) should also demonstrate that the performance of the European manufacturing sector is trailing that of its services sector. Later, the United Kingdom will disclose its Consumer Price Index (CPI) for February which is predicted to extend its gains for the fourth consecutive month by rising 0.4%. Such a result should provide Sterling with a fresh boost against other major currencies.

The Eurozone will then complete the session by revealing a leading Economic Sentiment Survey. Economists are concerned, that although another upbeat result could be on the cards, it may indicate that business owners are specifically worried about excessive euro strength.

New Zealand will publish its Trade Balance for the last month on Wednesday. Chinese economic woes should almost certainly weigh on this parameter resulting in a worse-than-expected print.

Great Britain will commence Thursday by posting its Retail Sales (RS) for February. Investors will be keen to learn if the RS can equal or surpass January’s impressive growth value of 2.3%.  Next, the USA will release its Durable Goods Orders (DGO) for last month. A positive reading will provide additional credence to the viewpoint that US Consumer Confidence is starting to acquire meaningful traction.

The USA will terminate the week by providing, possibly, its most pivotal event. The final revision of the Gross Domestic Product for the last quarter of 2015 should validate that minor growth was achieved during this period while details could provide important insights into whether the US Federal Reserve will hike interest rates in June.


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