Major Events of Last Week
The global financial markets were rattled last Friday after North Korea unexpectedly launched a nuclear test by activating a bomb more powerful than that of the Hiroshima strike during World War 2. Investors were already under stress after Germany issued a sequence of disappointing economic indicators and the European Central Bank delivered dovish monetary policies last Thursday. Oil prices rallied for the first time in three weeks driven by a substantial drop in US crude reserves. The foremost US indices crashed last Friday exemplified by the Dow Jones Industrial Average plunging by 321 points; the S&P500 falling by 43 points and the NASDAQ dropping by 109 points.
North Korea stunned the world towards the end of last week when it instigated its fifth and largest nuclear explosive and also advised that it was now capable of arming ballistic missiles with warheads. This experiment was planned to celebrate the sixty-eighth anniversary of the birth of North Korea and was intended to demonstrate to the United Nations that it was totally helpless in preventing and restricting the North Korean nuclear program. Analysts subsequently assessed that the last week’s blast was larger than that of the Hiroshima event of WW2. This worrisome event attracted aggressive condemnations from both China and the USA.
A sharp decline in German exports during July prompted European equities to register their first weekly slump in practically one month. Specifically, German trade surplus shrunk for the fourth successive month initiating immediate concerns about the true health of the Eurozone’s economic powerhouse. This development irritated trader anxiety even further which had already been substantially upset by North Korean conducting a nuclear test earlier in the session.
Investor sentiment was also dented last Thursday by the European Central Bank (ECB) presenting a spate of docile monetary policies. Essentially, the ECB adopted a cautious attitude by keeping its interest rates unchanged and advising that its asset-buying program would still terminate next March and that it was presently seeking options to extend its current quantitative easing policies even further. Traders were definitely not impressed by these ECB statements as they were hoping for more aggressive action and better clarification of future intent.
Oil prices rose by almost 6% last week by curtailing a two-week bearish slump and registering their biggest weekly increase since mid-August. The primary catalyst driving this bullish performance was an agreement reached by Russia and Saudi Arabia last Monday intended to help stabilize global crude production. Oil demand is now expected to surpass supply during the third quarter of this year as a direct result of decreasing global stockpiles.
What to Expect This Week
No major global events or data releases are scheduled for Monday.
The United Kingdom will present key inflation data on Tuesday. Consumer Price Index (CPI) is expected to rebound back into expansionary territory by beating its 0.0% mark. Producer Price Index (PPI) should remain steady about its +0.3% level.
On Wednesday, Great Britain will issue its Labor Report for August which should confirm that its ‘Unemployment Rate’ still hovers about 4.9%. The Eurozone will then post its ‘Industrial Production’ figure for last month. A print above +0.6% is required in order to provide confidence that the stimulus program of the ECB is starting to bear fruit. Later, New Zealand will publish its ‘Gross Domestic Product (GDP)’ for the second quarter of 2016. Expert consensus is currently favoring growth of 0.7%. Australia will complete the session by disclosing its keenly-awaited ‘Labor Report’ for August which should ratify an ‘Unemployment Rate’ of 5.7%.
The United Kingdom will reveal its ‘Retail Sales’ for last month on Thursday. A value of 1.5%+ is required in order to demonstrate that the British economy is weathering the Brexit storm. A major event will then occur when the Bank of England announces its latest interest rate decision and monetary policies. This affair could be quite dramatic as the BoE is forecasted to trim rates by at least 25bp. The USA will then issue its ‘Jobless Claims’ for the previous week, ending 11th September, which should once again verify that the number of Americans filing first claims for unemployment benefits continues to remain within the longstanding range of ‘240k to 290k’. The USA will also produce a major ‘Business Confidence Survey’ and ‘Retails Sales’ for August. The former should beat its previous 2.0 result while the latter is anticipated to surpass last month’s dismal value of 0.0%. The USA will then finish the day by divulging its ‘Industrial Production’ for last Month. This parameter needs to deliver a value of 0.7% or greater in order to verify that the US manufacturing sector is beginning to rebound from an insipid start to 2016.
The USA will terminate the week by providing its latest CPI information. This key data must provide evidence that inflation is moving towards the Fed’s designated target of 2% in order to boost prospects of an interest rate hike during September.