Week in Review

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Equities slipped downwards last Friday although they still managed to extend their gains for the third consecutive week. Essentially, no assertive catalysts appeared capable of seriously dominating price action. Consequently, investors opted to adopt a cautious stance as they kept a nervous eye on the growing unrest within Ukraine, where mediators were attempting desperately to conclude a deal. The markets basically ended the week by consolidating their advances they registered during the previous days exemplified by the Dow Jones Industrial Average dropping by 30 points; the S&P500 slipping lower by 4 points and the NASDAQ declining by 5 points.

The pivotal event last Friday occurred when the USA posted a key economic indicator disclosing that home resales had slumped during January to record a 1.5 year low. Nonetheless, investors were once again not deterred by this disappointing performance as they blame it on an extremely cold and prolonged USA winter. In contrast, they continued to support the financial markets by initially driving them slightly higher in response to a promising manufacturing figure posted last Thursday.

Revered economists summarized last Friday’s developments by explaining that evidence now firmly exists indicating that the US economy is expanding at a moderate pace and that inflation remained under control. They added that this combination was sufficient to support riskier assets, such as equities, during the short-term at least. The prevailing optimistic mood was also underpinned by growing speculation that the US Federal Reserve will persist in trimming its stimulus policies at a well-defined and controlled pace. As such, fears that the Fed could soon stop pumping easy money into the financial markets have been successfully suppressed.

Stocks received a further boost last Friday after a number of topmost US companies published earnings reports which surpassed analysts’ expectations. Leading the pack was Priceline which produced encouraging figures for the fourth quarter of 2013.  The internet travel booking firm witnessed its shares surge by almost 3% during the session enabling it to generate one of the best performances on the S&P500 towards the end of last week. Hewlett Packard joined the party as well by presenting earnings that topped predictions and by revising its profit forecasts higher for 2014.

What to Expect This Week

The major global events scheduled for this coming week are as followings:

On Tuesday, China will publish its Conference Board’s leading Economic Index. If a good number is generated then such a result should suppress growing fears about the true health of the Chinese economy. Later in the day, the USA will issue a key consumer confidence figure. Economists are hoping for an upbeat number which will clearly demonstrate that the spate of recent disappointing labor reports and economic indicators were primarily caused by a difficult winter.

Great Britain will post the second reading of its Gross Domestic Product for the fourth quarter of 2013 on Wednesday. Analysts are anticipating that there will not be any significant modifications to the first value of 0.7%. New Zealand will present its trade balance during the evening GMT. If a value is generated displaying a third month of consecutive gains that this will be a sound indication that the economy of the nation’s largest exporter, China, is still flourishing.

On Thursday, the USA will issue its US Durable Goods Orders and Core Durable Goods Orders data. These figures are potential market movers as experts have a track record of not being able to predict the actual releases with any degree of accuracy. As a negative outcome is anticipated, an upbeat result could spark a bullish stock movement. Later in the day, Mario Draghi, the President of the European Central Bank, will deliver a speech in Frankfurt. Watch out for any unexpected bullish remarks. Finally, Japan is scheduled to release its Retail Trade indicator amid expectations of a 4% increase

Friday is a particularly busy day. The UK will disclose an important consumer confidence index which should remain unchanged at -7. Australia will subsequently reveal its Private Sector Credit number which could bring the new stance of the Reserve Bank of Australia into question should it miss its mark. Next, the Eurozone will issue its Consumer Price Index. A disappointing result could encourage the European Central Bank to instigate additional stimulus at its March meeting.

In addition, Canada will post its Gross Domestic Product on Friday which could prompt the Bank of Canada into also considering new quantitative easing measures if it surprises to the downside. The USA will then publish its own Gross Domestic Product for the Q4 of 2013 and a revised figure of 2.6% is widely predicted.  Finally, Mark Carney, the Governor of the Bank of England (BoE), will make a speech in Frankfurt. Analysts will seek vital insights into BoE future policy guidance from this event.

 

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