Major Events of Last Week

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Global equities terminated five consecutive weeks of gains by entering a new consolidation period towards the end of last week. The financial markets began to stabilize after experiencing extensive turbulence and volatility during the first three months of 2016. Investor confidence did receive a boost last Friday when the US Department of Commence revised the US Gross Domestic Product (GDP) for the last quarter of 2015 higher from 1% to 1.4%. This update enabled the US economy to register a final annual growth figure of 2.4%.The foremost US indices produced a mixed reaction last Friday epitomized by the Dow Jones Industrial Average rising just over 13 points; the S&P500 falling by 1 point and the NASDAQ climbing by almost 6 points.

The USA posted a key indicator last Friday disclosing that its economy grew at a faster pace than anticipated during the fourth quarter of 2015. The primary catalyst driving this welcoming improvement was an upward revision in consumer spending, which is responsible for nearly two-thirds of the entire US economic activity. Specifically, this critical parameter grew at 2.4% compared to the previously reported 2.0% immediately suppressing any fears of an imminent recession. The GDP report demonstrated that consumer spending was solidly underpinned by rising house values, declining oil prices and improving wages.

In addition, the US department of Commence provided further good news by stating that US business inventory stockpiles was not as high as it had originally stated within its first two revisions. Analysts are now predicting that the GDP for the first quarter of 2016 should hover about the +1.5% mark. However, they are warning that this estimation could be optimistic as a direct result of both the present extensive levels of company inventory and the reduced capital goods orders placed during the first two months of this year.

After analyzing recent geopolitical developments, economists have subsequently concluded that the stock markets are stabilizing after enduring a bout of volatile events. In particular, they are currently expounding the viewpoint that a state of normality now exists. Consequently, powerful catalysts will be needed to activate any new trends, albeit bullish or bearish. They further suggest that such drivers could be provided by the new Corporate Earnings Season, scheduled to commence in April. Their theory is based on the premise that earnings predictions for the first quarter of 2016 have been constantly revised downwards because of Chinese economic woes and stumbling oil prices. However, many analysts have now reached the opinion that these pessimistic forecasts have gone too far and, as such, have set the scene for better-than-expected corporate profits.

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What to Expect This Week

The USA will instigate proceedings by presenting its ‘Personal Income and Outlays’ (PIO) for last month on Monday. As the US Federal Reserve use this indicator as one of their primary instruments to assess inflation, investors will be keen to learn if the POI can beat its previous result of +0.5%.

On Tuesday, Japan will disclose its latest ‘Industrial Production’ figure. A weaker-than-expected print could provide the Bank of Japan (BoJ) with more incentive to introduce additional stimulus measures within the imminent future.

The Eurozone will reveal a key Economic Sentiment Survey on Wednesday which should improve on its previous value of 103. If not, then the euro could come under fresh pressure.

Great Britain will post its latest revision of its GDP for the fourth quarter of 2015 on Thursday, which should remain steady at 0.5%. Next, the Eurozone will publish the first sighting of key inflationary data for March. The European Central Bank will study this data carefully in order to determine if more quantitative easing may be required during 2016. The USA will then announce its ‘Jobless Claims’ total for the prior week ending 26th March, which should provide another read within the 250k and 280k range. Japan will complete the session by issuing the Purchasing Manager’s Index (PMI) for its vitally important manufacturing section. This PMI should provide vital insights into the true health of the Japanese economy by revealing if inflation is now advancing towards the BoJ designated target of 2%.

On Friday, the Eurozone will release a spate of PMIs (Manufacturing) for March. Analysts are hoping that both German and French factory outputs can register growth by supplying values above the critical 50 mark. The pivotal event of the week will then occur when the USA proclaims its eagerly awaited Labor Report for last month. The Non-Farm Payrolls (NFP) needs to demonstrate that US employers created 200k+ new jobs during March in order to verify that the US Labor Market is still gaining traction. Finally, the USA will complete the week by delivering a prominent inflationary index. Economists are hoping that this figure, produced by the US Institute of Supply, can rebound from last month’s worrisome 49.5.


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