Major Events of Last Week
Geopolitical and economic uncertainties dominated the financial markets as last week drew to a close. Specifically, the USA published economic data verifying that its economy contracted during the first quarter of 2015 and that it was on course to register its worst six month performance in practically five years. Investors were also growing increasingly concerned by the Greek debt crisis particularly since a firm resolution is still nowhere in sight. Greece is now in serious danger of defaulting on a major repayment to the International Monetary Fund (IMF), scheduled for 6th June. The leading US indices slumped last Friday as demonstrated by the Dow Jones Industrial Average plunging by just over 85 points; the S&P500 sliding lower by almost 11 points and the NASDAQ dropping by slightly over 21 points.
Analysts had their worst fears confirmed late last week when the USA revised its Gross Domestic Product (GDP) for the first quarter of 2015 downwards from an insipid growth value of +0.2% to -0.7%. They were further distressed by other major parameters predicting no significant recovery for the second quarter. After carefully studying these details, prominent economists quickly advised that these worrisome results must now definitely remove any prospects of the US Federal Reserve hiking rates during the short-term.
They based this important conclusion on the fact that the Fed has repeatedly stated that its final decision will always be heavily dependent on the quality of vital economic data releases. As recent results have been both disappointing and have missed market expectations, analysts have consequently surmised that the US Central Bank will now have choice but to delay its first rate hike.
The precarious situation of the Greek debt crisis seems to be coming to a boil. For instance, the USA issued an assertive warning last Friday about the sizeable dangers posed to the fragile global economic recovery should Greece fail to comply with its June repayment schedule. The plight of this situation was highlighted by Germany stating that no resolution was in sight despite many months of intense negotiations.
Jack Lew, U.S. Treasury Secretary, emphatically advised that the substantial risks to global economic stability cannot be ignored should Greece exit the Eurozone. He continued by stating that the world desperately requires calm and certainty at present which would totally disrupted if Greece enters bankruptcy. Athens must make a repayment of 300 million euros to the IMF next Friday although attempts are being made to extend this deadline until later in June.
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What to Expect This Week
The ensuing major economic indicators will be posted over the coming days.
The UK will commence proceedings by declaring its manufacturing PMI for May on Monday. This key parameter should rebound from its previous print of 51.9 to 52.0 last month. The USA will then disclose its Personal Income and Outlays for last month, which are expected to post an increase of 0.2%. Later, the USA will declare its ISM manufacturing data for May. Pundits are favoring a bounce back to 52.0 from April’s 51.5.
The Eurozone will reveal the first sighting of its CPI for May on Tuesday. Analysts are hoping for a value of 0.2% or greater in order to confirm that this major trading zone has finally succeeded in countering the threat of deflation.
Great Britain will launch Wednesday by proclaiming its Services PMI. This indicator is predicted to rise from 59.2 to 59.5. The Eurozone will then present its Unemployment rate for April. The preferred forecast is for this statistic to inch lower to 11.2% from 11.3% in March. At the same time, the Eurozone will proclaim its Retail Sales number for April, which should confirm an impressive monthly increase of 0.6%. Latter in the session, the USA will post a key labor report (ADP) identifying just how many new jobs were created by its private sector during May. The greenback will surge upwards if a result greater than 200k is validated. Next, the USA will publish its non-manufacturing ISM for last month. A drop to 57.0 from its prior reading of 57.8 is presently the favored outcome.
On Thursday, the Bank of England (BoE) will pronounce its latest rate decision, which should remain steady. The European Central Bank will then follow by stating its own Interest Rate decision. Again, no changes are advised.
The Eurozone will disclose its Gross Domestic Product for the first quarter of 2015 on Thursday. A steady growth of 0.4% is currently the preferential outcome.
The pivotal event of this week, if not the month, will then occur when the USA issues its vitally important Non-Farm Payroll (NFP) for May together with other key labor market statistics. Prominent analysts are expecting the NFP to improve from 213K in April to 221k this time around. The US Unemployment Rate should remain steady at 5.4%. The US Dollar will acquire significant support if the actual results surpass these predictions.
