Week in Review

At the end of a volatile week, the financial markets succeeded in creeping higher last Friday in response to a number of global catalysts. The USA published a spate of encouraging economic indicators indicating that its economy continues to improve. China advised that it was on the brink of instigating additional stimulus measures in order to bolster to flagging economic recovery. Conjecture also increased that the European Central Bank will ease its monetary policies within the imminent future in order to combat deflation. In response to these developments, the leading US indices rose last Friday epitomized by the Dow Jones Industrial Average surging by slightly over 48 points; the S&P500 climbing by almost 8 points and the NASDAQ inching higher by 2 points.

Investors increased their risk appetite last Friday after the USA posted a bout of encouraging economic data supporting a sequence of impressive results released last week. The US Commence Department issued its consumer spending figure for February which disclosed that it complied with market expectations by increasing to 0.3% from January’s 0.2% result. Later in the session, a key consumer confidence index was produced by Thomson Reuters and the University of Michigan exposing a slight decline from February’s 81.6 to this month’s 80.0.

Prominent analysts summarized last week’s developments by advising that although an impressive rebound is in progress at present, the financial markets are still vulnerable to a serious correction. They essentially based this prediction on a developing pattern which clearly demonstrates that equities rose during the earlier part of each trading day last week only to sell-off towards market close. They explained that such behavior often occurs prior to the birth of a major bearish trend.

Elsewhere, the Chinese Premier, Li Keqiang, lifted investors’ spirits when he advised that his parliament had devised a series of new stimulus measures capable of revitalizing his nation’s struggling economy. Economists were especially pleased by this announcement as any such policies will not only benefit China but also global growth as well. Spain released data last Friday demonstrating that consumer prices had slipped to 0.2% during this month compared to a forecasted rise of 0.1%. In addition, the Italian cost of borrowing declined to its lowest value since the autumn of 2005. Global equities experienced a significant level of volatility during last week as the conflict between Russia and the Ukraine oscillated between hope and despair. Leaders from the Eurozone and the USA continued to expend time and effort to devise stricter sanctions which can be readily and effectively enforced, should Moscow take any further military action against other Ukrainian regions.

What to Expect This Week

A number of major global releases will be posted during the course of this coming week.

New Zealand will start the week by presenting its Building Permits for February. Experts are forecasting that January’s depressing figure of -8.3% should be corrected by a 2% increase. The Eurozone will then issue its advanced CPI figure for March. Signs are not supportive of a good result after Germany disclosed its equivalent number last Friday indicating a decrease from 1.3% in February to 1% this month. Should a poor result emerge, then deflationary concerns could prompt the European Central Bank to activate new measures later this week. Janet Yellen, the Chair of the US Federal Reserve, will deliver a speech later in the session. The markets will monitor her tone very carefully in order to detect any clues about when a US rate hike will occur.

Tuesday will kick-off with China posting its final manufacturing PMI for March. This release should confirm the preliminary number which demonstrated a third consecutive month of contraction. The Reserve Bank of Australia will subsequently publish its Interest Rate decision. No change is expected as the central bank is forecasted to maintain its neutral stance. The US Institute of Supply Management will complete the day by presenting its Manufacturing PMI for March. Investors will study this information carefully with the intent of detecting any clues concerning the pending release of the US Non-farm Payroll number on Friday.

On Wednesday, the USA will issue its ADP employment report which will reveal how many new jobs were created by US employers within the private sector during March. Again this data could help predict the nature of Friday’s all-important labor report.

The European Central Bank will announce its interest rate decision on Thursday followed by hosting a press conference shortly afterwards. Economist will be keen to discover whether the central bank intends to initiate any new stimulus policies in the imminent future in order to counter deflationary pressures. The US Institute of Management will then release its non-manufacturing PMI. As the service sector supports the largest number of jobs in the USA, this figure could also provide insights into the current state of the US unemployment scene.

The pivotal event of the week will occur on Friday when the USA will disclose its eagerly awaited labor report for March. This month’s event will be of significant importance as the number posted should not be directly influenced by weather considerations similar to those of the last two months. This information is vitally important as the US Federal Reserve uses it extensively in determining its future stimulus policies.

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