Week in Review
The global markets continued to fall last Friday amid concerns that many high-flying momentum stocks could now be heavily overbought. As investors have begun to adopt an increasingly risk aversive stance, many revered economists are currently evaluating whether this problem is no longer contained within the biotech and technological trading sectors but has developed into a full-blown correction. The flight to safety was clearly visible last Friday demonstrated by the foremost US indices plunging for the second consecutive day epitomized by the Dow Jones Industrial Average crashing by nearly 116 points; the S&P500 falling by 13 points and the NASDAQ dropping by just over 53 points.
Specifically, shares of major biotech and technological firms recommenced their downward spiral last Thursday following a brief respite created by the recent release of optimistic Fed minutes. Prominent analysts explained this new trend by stating that investors were seriously questioning the true health of high-flying momentum stocks which underpinned the impressive market rally of 2013. Are these key equities basically overvalued is now the burning consideration on the minds of many traders at present? The NASDAQ, which comprises a member list with a significant technological bias, took a severe hit last Thursday by plunging nearly 3% to record its worst daily performance since the middle of 2012.
Expert consensus summarized the worrisome events that evolved towards the end of last week by explaining that traders are ditching those firms that underpinned the inspiring 2013 market rally in favor of safe-haven and discounted equities, located within less-exposed trading sectors. They also advised that this bearish phenomenon is still mainly restricted to the USA markets and has not so far spread globally, particularly into Europe and Asia.
The stock markets came under additional pressure at the end of last week when JPMorgan Chase & Co., the largest bank in the USA, published its earnings report for the first quarter of 2014, which badly missed analysts’ expectations. This dismal result caused the firm’s shares to plunge by over 3% during the course of last Friday’s session as well as contributing to a 0.6% decline in the financial sector of the S&P500.
Elsewhere, there was a joyous event when Greece jubilantly re-entered the bond market after spending two years in the financial wilderness. This event was a great success for the nation that was previously at the heart of the Eurozone’s debt crisis in 2012. The Greek Prime Minister, Evangelos Venizelos, elatedly announced that the sale had been oversubscribed by nearly 8 times.
What to Expect This Week
The ensuing key global economic indicators will be posted over the course of this week.
Monday commences with the Eurozone releasing its Industrial Production figure for February. An improvement of 0.2% is predicted compared to January’s performance of 0.1%. The USA will then disclose its Retail Sales number for March. Following the posting of an encouraging spate of US economic indicators in recent weeks, investors are looking from a jump of 0.8%, which would be the largest climb recorded by this indicator since May 2013, if validated.
The Reserve Bank of Australia will disclose the minutes from its last policy meeting on Tuesday. This document should reveal a some serious disquiet about the current high value of the Australian Dollar compared to other major currencies, especially the US Dollar. Great Britain will present its latest inflation data later in the session which should have dropped from 1.7% to 1.6% last month to register its lowest value since late 2009. Germany will subsequently post an important investor confidence survey which is expected to hover about a three year high. Next, the USA will issue its Consumer Price Index. If this figure inched higher last month, then such a result could provide the US Federal Reserve with enough justification to continue implementing its current stimulus tapering policies.
Wednesday has a busy schedule. China will first publish its Gross Domestic Product which is forecasted to record a 7.4% increase. However, any miss could prompt another market sell-off. Japan will then present its Industrial Production figure which is predicted to counter the new sales tax introduced at the start of April by registering a sizeable gain. Later in the day, the United Kingdom will reveal its Unemployment Rate and Claimant Count Change. Analysts are expecting a solid performance with the former parameter inching downwards to 7.1% while the latter should have declined by 30,000 during March. The Eurozone will then post its Consumer Price Index which should remain steady at 0.5%; its lowest value in 5 years. The publication of the US Housing Starts and Building Permits should confirm that the important housing sector is still struggling to acquire any real momentum.
The Eurozone will issue its Current Account Balance on Thursday which should record a rebound during February from a dramatic decline during January. Analysts are predicting such a positive performance as a direct result of significantly improving weather conditions throughout North America.
On Friday, most of the global markets will be closed in celebration of Good Friday.