Major Events of Last Week
The directional movements of the financial markets were again dominated last week by intense speculation concerning when the US Federal Reserve will most likely instigate in first interest rate hike in almost 10 years. Specifically, as Janet Yellen, the Fed Chairperson, again re-emphasized last week; the exact timing of this critical event is still heavily data-dependent. Consequently, all key economic releases from the USA were scrutinized very carefully in order to gain any vital insights into Fed deliberations. In addition, stock prices were strongly influenced by the dramatic appreciation in value of the US Dollar which is now beginning to weigh heavily on the earnings of US international companies. The primary US indices rose last Friday epitomized by the Dow Jones Industrial Average climbing by slightly over 34 points; the S&P500 inching higher by almost 5 points and the NASDAQ edging higher by nearly 28 points.
The USA posted a spate of key economic indicators last Friday, which missed analysts’ expectations. For example, the final revision of the USA Gross Domestic Product for the fourth quarter of 2014 revealed that national economic growth faltered during Q4. Although the US Department of Commence advised that GDP remained unchanged from its previous revision of 2.2%; this result still failed to meet economists’ predictions of 2.4%.
Official spokespersons advised that the cooling down was primary caused by substantial reductions in business investment although sturdy consumer spending prevented an even deeper deterioration. They also stressed the increasing impacts of a stronger US Dollar, which are starting to hurt US corporate profits. In fact, a number of major US Multinationals, such as Intel and IBM, issued statement endorsing this point of view late last week. The greenback has now risen by almost 8% against a basketful of other major currencies since the middle of 2014. Stocks drifted higher last Friday amid speculation that this weaker-than-expected GDP could now prompt the Fed to delay interest rate hike.
The USA also published an important consumer sentiment index for March last Friday demonstrating a marked decline in confidence by dropping to 93 from 95.4 in February. The primary contributors to this slump were economic uncertainties in Asia and Europe; severe wintry conditions in the USA and a robust US Dollar. Households also opted to bank the savings they gained from dramatically declining petrol prices. Analysts rate this index as highly important since consumer spending accounts for nearly 70% of the entire US economic activity. Investors are now expected to assert energy next week assessing what will be the next key catalysts driving market movements and influencing Fed deliberations.
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What to Expect This Week
The following global economic data will be announced during the course of this coming week.
Germany will launch proceedings by presenting its Consumer Price Index for March on Monday. Should this important inflationary figure drift back into negative territory, then the euro could come back under pressure.
On Tuesday, the UK will disclose the final revision of its Gross Domestic Product for the fourth quarter of 2014. As many pundits are predicting new changes to the original 2.7% reading, expect an increase in volatility if confirmed. Next, the Eurozone will reveal its Consumer Price Index for this month which is expected to record a slight improvement for the third consecutive month. Canada will then declare its Gross Domestic Product for January and a minor decline is presently the favored outcome. Japan will terminate the session by proclaiming its Tankan Outlooks for the first quarter of 2015. If this business confidence index registers any sort of decline, then this could be an initial sign for further quantitative easing by the Bank of Japan.
China will commence Wednesday by announcing the final revision of its Manufacturing PMI for March. This indicator could signal a new state of economic contraction by slipping back under 50. Great Britain will then post its Manufacturing PMI for March which should strengthen for the third successive month. The USA will then publish its ADP Employment Change for March, which is anticipated to confirm that employers in the private sector created 231,000 new jobs during March. Later, the USA is also scheduled to issue its Manufacturing PMI for March. Investors will be particularly interested in the employment component of this indicator in order to detect any clues concerning the forthcoming release of the all-embracing US Non-Farm Payroll figure on Friday.
On Thursday, Australia will present its Trade Balance for February, which has continuously recorded a deficit since mid-2014. As analysts are not expecting any radical modifications, this posting could be a non-affair.
Without question, the pivotal event of the week will occur on Friday when the USA declares its Unemployment Rate and Non-Farm Payrolls (NFP) for March. Expert consensus is currently predicting that US employers generated 250k+ new posts last month. However, should the actual result miss this target, then the US Federal Reserve could acquire additional ammunition to delay an interest rate hike until later in 2015.
