Major Events of Last Week
Investor sentiment received a substantial boost last Friday after the USA released an encouraging labor report that surpassed market expectations. Job growth rebounded sharply from March’s dismal performance and the US unemployment rate declined to register a seven-year low. David Cameron, the Prime Minister of Great Britain, surprised his critics by securing an emphatic victory in the UK General Election last Thursday. A resolution to the worrisome Greek debt crisis may now be imminent after significant progress was declared late last week. The leading US indices roared higher last Friday epitomized by the Dow Jones Industrial Average rocketing upwards by 267 points; the S&P500 surging higher by nearly 30 points and the NASDAQ climbing by almost 60 points.
The US Department of Labor published its highly anticipated labor report last Friday disclosing that the US employment market was still gathering momentum despite the economic slowdown registered during the first quarter of 2015. US employers created 223,000 new jobs during April with both the construction and services sections faring particularly well. Nevertheless, the report did contain some troublesome features. For instance, the dismal March Non-Farm Payrolls was revised even lower and wage growth was practically stagnant.
After studying these details carefully, economists subsequently concluded that the report certainly countered the recent spate of weaker-than-expected US economic indicators. However, they still advised that the April rebound was not robust enough to entice the US Federal Reserve into hiking interest rates before this coming September. Nonetheless, the financial markets responded very positively to this data demonstrated by stocks surging higher.
Fears of a ‘hung parliament’ result in the British General Election were decidedly quashed last Thursday after the ruling Conservative Party recorded a decisive outright victory. David Cameron, the UK Prime Minister, secured another five-year term in office by winning his party its first absolute majority in over 20 years. He successfully convinced the voting public to support his program of economic reforms aimed at achieving improving living standards at a moderate pace.
Progress in the Greek debt crisis was announced last Friday following fraught and very intensive negotiations. Alexis Tsipras, the Greek Prime Minister, predicted that a resolution should soon be forthcoming capable of securing the financial aid Greece requires in order to avoid bankruptcy. He stated that progress had been achieved despite the recent emergence of numerous new obstacles.
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What to Expect This Week
The following key economic data will be published this coming week.
The Eurogroup of financial ministers will conduct an all-day meeting on Monday. Unquestionably, the Greek debt crisis will be the center of attention and investors will be hoping for some meaningful progress. Later, the Bank of England will announce its latest Interest Rate Decision and a ‘no change’ verdict is presently the favored outcome.
No major events are scheduled for Tuesday.
On Wednesday, Australia will declare its Wage Price Index for the first quarter of 2015. A result below the predicted 0.6% could entice the Reserve Bank of Australia to consider new monetary easing policies. China will then present its Retail Sales and Industrial Production figures for April. The Australian and New Zealand Dollar could come under fresh pressure if these two key parameters confirm any further deterioration in the Chinese economy. Next, Germany will disclose the first sighting of its Gross Domestic Product (GDP) for the first quarter with pundits forecasting growth of 0.5%.
Later on Wednesday, the United Kingdom will reveal its Claimant Count Change for last month. Expert Consensus presently predicts a rebound from last month’s poor showing. The Bank of England (BoE) will then post its Quarterly Inflation Report. This event will be supported by a subsequent speech by the BoE Governor, Mark Carney. Sterling could receive a significant boost if an optimistic stance is contained within the report and supported by Carney. The USA will subsequently issue its Retail Sales for April which is expected to extend its gains for the second consecutive month. New Zealand will complete the day by releasing its own Retail Sales for the first quarter. Growth of 1.6% is presently the preferred outcome.
The USA will publish its Producer Price Index for last month on Thursday. Any improvement in inflation could bolster prospects of an early Fed interest rate hike.
Haruhiko Kuroda, the Governor of the Bank of Japan, is scheduled to deliver a speech on Friday. Investors will be keen to discover if Kuroda will signal the need for new stimulus measures in order to counter insipid consumer spending. The USA will terminate the week by presenting a key Consumer Sentiment Index for May. The US Dollar could acquire support if the anticipated mild growth is verified.
