Major Events of Last Week
Global equities were lifted last Friday after China posted encouraging inflationary data which registered an increase for the first time in five years. The British pound also staged a comeback late last week after the Bank of England advised that it was not overly concerned about Sterling’s 20% recorded since the United Kingdom voted to exit the European Union. Increasing discretionary spending and improving motor sales helped US retail sales regain their composure during September. The premier US indices raced higher last Friday epitomized by the Dow Jones Industrial Average soaring by 66 points; the S&P500 rising by 4 points and the NASDAQ climbing by 9 points.
China published impressive economic data towards the end of last week disclosing that its Producer Price Index (PPI) surprisingly climbed during September to register its first monthly increase in practically five years. Consumer Price Index (CPI) also surpassed analysts’ expectations inciting both Asian and European stocks to surge upwards despite recording their largest weekly declines since the start of September. Prominent economists summarized these developments by stating that because Chinese inflation has performed so badly for such an extensive period of time, the better-than-expected PPI and CPI numbers released last Friday inspired confidence and definitely reduced concerns about the true health of the world’s second largest economy.
After recording additional falls during the early part of Friday, Sterling subsequently rallied strongly to erase all previous losses. This bullish recovery was sparked by positive statements issued by Mark Carney, the Governor of the Bank of England, who stressed that he was not overly worried by the current exchange value of the British Pound. The GBP, which has collapsed by 20% since the unexpected Brexit vote during the summer, has recently been further pressured by statements from Donald Tusk, President of the European Council, claiming that the Eurozone intends to impose very tough exit conditions on the United Kingdom.
The US Department of Commence divulged last Friday that Retail Sales rose by +0.6% last month rebounding strongly from August’s -0.2% decline. This figure supported an annualized increase of 2.7% form one year ago. The core reading, excluding food services, gasoline, automobiles and building materials, also inched upwards up 0.1% during September compared to its prior print of -0.1%. This last result is particularly important as ‘core Retail Sales’ tracks the ‘Consumer Spending’ element of the Gross Domestic Product very closely. Another key data release last Friday revealed that Producer Price Index rose across the board by registering its largest annual increase since December 2014.
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What to Expect This Week
The Eurozone will commence proceedings by presenting key inflationary data for September on Monday. The Consumer Price Index (CPI) is expected to remain steady by hovering about its 0.8% mark on an annualized basis. Later, New Zealand will declare its own CPI for last month which is predicted to drop from its prior print of 0.4% to 0.1% this time around. The Reserve Bank of Australia (RBA) will complete the session by disclosing the minutes from its latest monetary policy meeting. Investors will scrutinize this document carefully in order to glean any insights into whether the RBA is presently contemplating any further interest rate cuts within the imminent future.
On Tuesday, Great Britain will reveal its CPI for September which should extend recent gains by climbing to +0.8% from +0.6% on an annualized basis. A major event will then occur later in the day when China publishes its Gross Domestic Product for the third quarter of 2016. Economists are hoping for an impressive print in order to confirm that the Chinese economic recovery is successfully weathering recent recessionary scares.
The Bank of Canada (BoC) will deliver its latest interest rate decision and monetary policies on Wednesday. Although the former should remain steady at 0.5%, the markets will focus on those BoC statements advising on forward guidance policies. Australia will finish the day by posting its labor report for September. Employers are forecasted to have created about 15,000 new jobs during last month compared to -3,000 in August. In addition, the Unemployment Rate is predicted to have nudged higher from 5.6% to 5.7%.
The European Central Bank (ECB) will announce its latest rate decision on Thursday which should remain unchanged at 0%. Investors will then turn their attention to an important speech that will be presented by Mario Draghi, the ECB President, shortly afterwards. He should confirm that the ECB’s current bond-buying program will terminate next March. Next, the USA will issue its ‘Jobless Claims’ for the previous week, ending 16th October, which should once again verify that the number of Americans filing first claims for unemployment benefits continues to remain within the longstanding range of ‘240k to 290k’.
No major events or data releases are scheduled for Friday.