Week in Review

Global equities stabilized last Friday following a volatile week dominated by geopolitical tension and changes in US monetary easing policies. The S&P500 raced higher to register a record high after Russia disclosed that it had no plans to invade any other Ukrainian regions. In particular, the European markets posted their largest weekly increases in over four weeks amid encouraging economic data. However, the premier US indices slumped last Friday exemplified by the Dow Jones Industrial Average drifting lower by just over 27 points; the S&P500 slipping downwards by nearly 6 points and the NASDAQ dropping by nearly 42 points.

One of the pivotal events of last week occurred when the US Federal Reserve issued its eagerly awaited policy decision which caught some investors by surprise. The US Central Bank trimmed its influential monthly asset purchasing plan by an additional $10 billion per month, as widely expected. However, new policies were also introduced which basically eliminated the dependency of future interest hikes on just the US unemployment rate. Instead, a wider gauge of economic indicators will now be studied when assessing the need for any changes.

Investors were unquestionably taken aback by comments issued by Janet Yellen when she introduced timescales during her first press conference as the new Chair of the Federal Reserve implying that an interest rate hike could occur sooner-than-expected during the earlier part of 2015. Specifically, she advised that such a measure could be instigated about 6 months after the termination of the Fed’s monthly asset purchasing plan.

Geopolitical tension rose to the surface again late last week after the US President, Barrack Obama, activated additional sanctions against key Russian business institutions and personnel. The US government also warned that the current Crimean policy of the Soviet Union was placing the nation firmly on a path to economic isolation. This crisis intensified after Russian military forces forcefully occupied two Ukrainian naval bases. However, the escalating tension was partially defused last Friday when Vladimir Putin stressed that his nation has no military designs on other parts of Ukraine.

Prominent analysts issued forecasts towards the end of last week predicting that the European stocks markets should continue to rise during the remainder of 2014. They based their assessment on rebounding corporate financial performances as the Eurozone finally emerges from an extensive recession. Elsewhere, the Chinese Prime Minster, Li Keqiang, informed anxious investors that he was prepared to implement any and all stimulus measures necessary to boost his nation’s faltering economic recovery. 

What to Expect This Week

The following key events are scheduled to occur during this coming week.

China will launch proceedings on Monday by issuing its preliminary Manufacturing PMI. Anxious investors are expecting a third straight monthly result below 50 signaling a state of recession. Later in the day, the Eurozone, Germany and France will present their initial PMI figures for March. The French value will be of particularly interest in order to confirm it has finally attained a growth status.

On Tuesday, the United Kingdom will reveal its CPI data which is predicted to demonstrate that inflation declined during February from 1.9% to 1.7%. The USA will then post a key consumer confidence survey. Many analysts are expecting this indicator to bounce higher as weather-related issues subside.

The Governor of the Reserve Bank of Australia, Glen Stevens, is scheduled to deliver a speech in Hong Kong on Wednesday. He is expected to present a case claiming that the Australian Dollar is too high at present against other major currencies. Later in the session, the USA will disclose its Durable Goods Orders. This release is notorious for generating surges in volatility as it is very difficult to predict with any accuracy. New Zealand will subsequently post its Trade Balance which should register a third consecutive month of improvement after four successive months of declines. Japan will then complete this busy day by publishing its Retail Sales which should generate a positive result ahead of the launch of a new sales tax at the end of March.

Thursday will commence with the release of the UK Retail Sales figure for February which is forecasted to be an enhancement compared to a weak January result. The USA will then post its Pending Home Sales indicator for February. Investors will be keen to detect an improvement in this number as it has missed analysts’ expectations for seven straight months.

Great Britain will also kick off Friday by presenting its National Accounts data. Economists are predicting an improvement in the nation’s account balance after it registered a deficit of almost 21 billion Sterling for the third quarter of 2013. The Eurozone will complete the week by issuing important confidence indicators. These parameters could be disappointing as a direct result of the recent Ukrainian/Russian tensions.

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