Major Events of Last Week

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The release of probably the most important economic indicator in the world occurred last Friday which certainly did not fail to impress investors. The US Department of Labor published its highly awaited report for last month which clearly demonstrated that US job growth surged during October enabling the unemployment rate to register a 7.5 low value of 5%. This stellar performance definitely increased possibilities that the US Federal Reserve will soon instigated its first interest rate hike in practically a decade. The leaded US indices generated a mixed reaction Friday typified by the Dow Jones Industrial Average inching almost 2 points lower; the S&P500 falling by nearly 6 points while the NASDAQ rising by slightly over 7 points.

The USA posted key economic data at the end of last week disclosing that US employers created a staggering 271,000 new jobs during October compared to a predicted value of 180,000. This spectacular performance recorded the biggest monthly increase since December, 2014. The report did not stop there as it also boosted other encouraging parameters. For example, the unemployment rate declined from 5.1% to 5.0% hitting its lowest level since the spring of 2008. This factor is very important since it now means that this parameter now resides squarely within the Fed’s comfort zone. Prominent economists summarized these developments by advising that the released numbers certainly support a Fed lift-off in December.

The financial markets reacted swiftly to the outstanding Non-Farm Payrolls (NFP) illustrated by US Treasuries plunging sharply while the US Dollar soared higher to register a 6.5 year peak against a basketful of other major currencies. The growing prospects of increased US borrowing weighed on the Stock markets by dragging equity prices downwards. A Fed spokesman stated that these results clearly confirm that the US economy is gaining traction as well as, unquestionably, providing the foundation for monetary tightening within the imminent future.

Earlier in the week, Janet Yellen, the Fed Chairperson, instructed that the bar was now quite low for a possible interest rate hike in December. Revered economist subsequently interpreted her statements by concluding that just about 150,000 new jobs now need to be generated during October and November in order to comply with the Fed lift-off criteria. As last Friday’s NFP result of 271,000 clearly goes a long way to satisfying these stipulations, the stage is now set for the Fed to increase its interest rate from zero. The US labor report also bolstered the viewpoint that US economic growth should regain impetus during the fourth quarter of 2015 after stalling significantly at 1.5% during the summer months.

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What to Expect This Week

No major global events or data releases are scheduled for Monday.

On Tuesday, Australia will present a key Business Confidence Index which is expected to hover about its prior reading of 5. A lower outcome could exert fresh pressure on the already stressed Australian Dollar. Later, China will disclose its Consumer Price Index (CPI) for October. Economists are predicting that this parameter could jump above its current range of 1-2% following the release of more positive economic data in recent weeks.

The Governor of the Bank of England, Mark Carney, will appear before the British parliament on Wednesday. He is expected to endorse his current dovish stance by providing fresh insights into the BoE’s Quarterly Inflation Report published last week. The Reserve Bank of New Zealand (RBNZ) will complete the session by issuing its latest Financial Stability Report. This document is expected to deliver a downbeat message following last week’s disappointing employment figures and dairy auction.

On Thursday, Australia will reveal its Employment Report for October. Job growth is predicted to rebound from the previous month’s dismal showing of minus 5,100.

The Eurozone will launch Friday by declaring its Gross Domestic Product (GDP) for the third quarter of 2015. If this parameter contracts for the third consecutive period, then such a result could provide the European Central Bank (ECB) with enough assurance to implement new monetary easing policies sooner than later. The USA will terminate the week by announcing its Retail Sales for October. The Fed and investors are both hoping for a substantial improvement from the lackluster numbers produced during previous months.

 

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