Major Events of Last Week
The true health of the global economic recovery definitely came into focus last week after new data vividly confirmed that it could only be classified as ‘moderate and uneven’, at the very best. Investors were unquestionably spooked after China, Great Britain and the USA all advised that their national manufacturing outputs had contracted during April. Nevertheless, the financial markets and the US Dollar succeeded in staging a rebound last Friday amid signs that an US economic slowdown may now be subsiding. Specifically, the Dow Jones Industrial Average soared by 183 points; the S&P500 climbed by almost 24 points and the NASDAQ surged by nearly 64 points.
The USA published data late last week disclosing that Consumer Confidence had surprisingly increased last month and that automotive sales had also risen during April. Economists subsequently advised that these results undoubtedly added credence to the viewpoint that US economic growth could finally be regaining its composure after experiencing a substantial slowdown during the first quarter of 2104. Stocks consequently rallied despite other releases confirming slumps in both construction investment and manufacturing activity last month.
On the global scene, a dour picture was painted last week verifying that a number of major trading zones are still struggling to sustain any serious economic recovery following the financial crisis of 2007/08. For example, Chinese factory output only managed to register minimum growth last month while Japanese manufacturing output even contracted. In a similar vein, South Korea recorded its weakest export figures in nearly two years during April. Analysts are now forecasting that all three nations will need to consider instigating fresh monetary easing policies in order to counter these negativities.
The United Kingdom is also experiencing significant difficulties after declaring a substantial contraction in national factory output during last month. Specifically, the Purchasing Manager’s Index (PMI), relating to manufacturing, crashed from its previous reading of 54.0 to 51.9 during April to print its lowest level in over seven months. The recent release of a spate of disappointing economic indicators could now have a major impact on the outcome of the UK General Election, scheduled to be held this coming week.
The USA also added to the gloom after revealing that declining new orders contributed to a significant contraction within its vital manufacturing sector last month. PMI dropped from 55.7 to 54.1 in April to register its lowest rate of growth during 2015 so far. This weak performance was blamed on the present strength of the US Dollar.
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What to Expect This Week
The world’s key trading regions will publish the following key economic indicators this week.
Germany will launch proceedings by issuing its Manufacturing PMI for April on Monday. Economists are concerned that a poor performance could provide additional proof that the European economic recovery is faltering in unison with other major global nations.
On Tuesday, the Reserve Bank of Australia (RBA) will announce its latest Future Guidance Policy and Rate decision. The RBA is expected to adopt a dovish stance by stressing the need for a weaker Australia Dollar. Later, New Zealand will disclose important Labor statistics for the first quarter of 2015. Serious warnings have arisen recently implying that these figures could badly miss analysts’ expectations.
The United Kingdom will commence Wednesday by presenting its Services PMI for April, which should register an increase for the second consecutive month. The Eurozone will then reveal its Retail Sales for March and a further contraction is the current favored outcome. The USA will next publish the April’s employment change for its private sector. This report is very important has it could provide vital insights into the forthcoming release of the all-prevailing US Non-Farm Payroll on Friday. Later in the session, Janet Yellen, the Chairperson of the US Federal Reserve, will deliver a speech. Investors will be keen to learn if a June Interest Rate Hike is still on the cards.
The UK General Election will be held on Thursday. Sterling could take another hammering if a ‘hung parliament’ verdict is confirmed, as forecasted by many pundits. Australia will then declare its Unemployment Rate and Employment Change for last month. Can the recent string of encouraging results be sustained? Recent dovish comments from the RBA suggest not. The Bank of Japan will finish the day by posting the minutes from its latest Monetary Policy meeting. No surprises are anticipated this time around.
On Friday, China will disclose its Trade Balance for April, which is expected to rebound from its previous appalling performance. Canada will subsequently present its labor report for last month which should extend three successive months of impressive results. The USA will then provide the pivotal event of the week by proclaiming its Non-Farm Payrolls (NFP) and Unemployment Rate for last month. A recovery from last month’s woeful NFP figure is desperately needed in order to keep a June rate hike alive.
