Major Events of Last Week

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Global equities managed to press higher last Friday after they were provided with a modest lift by the release of a better-than-expected US economic indicator. However, a series of mixed US corporate reports restricted any extensive bullish surges. Expectations also improved last week that the US Federal Reserve could still instigate its first interest rate hike in practically a decade before the end of 2015. In contrast, the European Central Bank identified the increasing need to activate further stimulus measures in order to bolster the struggling European economy. The leading US indices crept upwards last Friday epitomized by the Dow Jones Industrial Average surging by almost 75 points; the S&P500 rising by just over 9 points and the NASDAQ climbing by nearly 16 points.

The USA posted a spate of important economic data towards the end of last week which delivered mixed results.  For example, the first sighting of a major Customer Sentiment Index surprised investors by rising to 92.1 beating economists’ expectations of 89.0. In contrast, Industrial Production slumped during September to register its second consecutive monthly decline despite meeting market forecasts. Prominent analysts summarized these developments by advising that the US economy now appears to be garnering enough traction to support a Fed hike during 2015.

The directional movements of the stock markets were also influenced by the publication of important US corporate earnings reports last Friday. Specifically, traders were compelled to expend time evaluating the implications of the varying performances generated by giants, such as General Electric and Honeywell. Whereas, the stock of the former appreciated by almost 3.5% after its Q3 earnings surpassed expectations; the shares of the latter suffered a 2.5% drop despite beating profit forecasts.  In general, US companies are predicted to disclose a 4% decline in revenues and profits for the third quarter of 2015 as a direct result of Chinese economic woes and weakening commodity prices.

Fed speculation came back to the fore last week. Many investors had completely written of any prospects of an interest rate hike until 2016 after the USA presented a very dismal labor report earlier this month. However, a spate of recent results has now altered this perception especially after revealing significant improvements in the US labor market and inflation. Consequently, traders have now opted to increase their bets that the US Central Bank will press the trigger before the end of this year. In complete contrast, the European Central Bank is now on the verge of activating a new series of stimulus measures in order to counter sluggish European economic growth.

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What to Expect This Week

No major events or data releases are scheduled for Monday.

On Tuesday, the USA will present its Housing Starts for September which are expected to rise from their previous reading of 1.126 million units. Investors will study this parameter carefully in order to determine whether this important sector of the US economy is able to support recent improving data releases. Later, Japan will disclose key export and import information which should throw light on the true state of its economy.

The Bank of Canada (BoC) will launch Wednesday by announcing its latest interest rate decision and introducing any new monetary policies. However, this event should be a non-affair as the BoE is expected to keep rates unchanged and to refrain from introducing any new stimulus actions on this occasion.

On Thursday, the United Kingdom will disclose its Retail Sales for last month. Based on the posting of recent impressive British economic indicators, analysts are predicting that this parameter should extend its monthly growth by climbing from its prior print of 0.2%. The European Central Bank (ECB) will then declare its interest rate decision and latest monetary policies. Although the ECB is forecasted to maintain its rates on hold, watch out for this central bank adopting a more dovish stance in the subsequent press conference. If confirmed, expect the euro to nose-dive across the board. Next, Canada will publish its Retail Sales for September which should beat their prior value of 0.5%.

Finally, the USA will complete Thursday by issuing its Jobless Claims for the previous week and Existing Home Sales for September. Traders will be keen to learn if the number of Americans applying for first-time unemployment benefits continues its downward trend. Existing Home Sales should register an improvement over its previous reading of 5.31million units.

The Eurozone is scheduled to declare a series of major inflationary figures on Friday. Current forecasts favor French Composite PMI slipping from 50.4 to 50.1; Germany Composite PMI dropping from 52.5 to 51.8 and the Eurozone Composite PMI declining form 53.9 to 53.4.  Canada will terminate the week by revealing its CPI for last month. Economists are hoping that the ‘no-growth’ performance of August can be improved on this time around.


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