Major Events of Last Week
The USA completed another volatile week by publishing its highly anticipated labor report for August. This keenly awaited document attracted even greater prominence this time around because it could determine whether the US Federal Reserve will hike its interest rates for the first time in practically a decade when it convenes at its next monthly meeting, commencing 15th September. The markets had already experienced a significant sell-off prior to this event amid mounting concerns about the true health of the Chinese economic recovery. The key US indices finished the week on a sour note epitomized by the Dow Jones Industrial Average crashing almost 262 points; the S&P500 edging lower by just over 28 points and the NASDAQ dropping by nearly 46 points.
Investors were unquestionably disturbed when the USA posted its labor report for last month which did nothing to resolve the burning question about when precisely will the US Federal Reserve hike interest rates. This is because the primary figures portrayed a very confusing picture. For example, US job growth slumped during August as demonstrated by US employers creating just 173, 000 new posts during this period compared to 245,000 in July and analysts’ expectations of 220,000.
The US Department of Labor subsequently advised that August’s performance was the worst in almost 2 years primarily due to the US manufacturing sector streamlining its workforce at the end of the summer season. However, officials did explicitly stress that investors should not be unduly worried by the lower-than-expected result as a known statistical glitch often generates such disappointing figures for the month of August.
In addition, the document definitely contained some high spots exemplified by the US unemployment rate declining from its prior reading of 5.3% to 5.1% to register its lowest value in practically 7.5 years. The number of extra jobs created in June and July were also revised upwards by a combined total of 44,000 producing an average monthly gain during the last quarter of 221,000. The report disclosed further good news by stating that the average hours worked per week had increased and that the average hourly earnings had surged by 8 cents at its fastest rate in nearly 7 months.
Is the data good enough to prompt the Fed into hiking rates during September? Economists certainly expressed mixed viewpoints after carefully studying the figures. Some concluded that the data was robust enough to support a rate hike as it did not detracted from the overall health of the US economy. In contrast, others advised caution amid the current geopolitical uncertainties.
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What to Expect This Week
Japan is scheduled to present the final revision of its Gross Domestic Product (GDP) for the second quarter of 2015 on Monday. This parameter is expected to confirm a deepening recession by registering contraction of 1.8% on a monthly basis. A worst result could prompt the Bank of Japan into contemplating new stimulus.
Australia will launch Tuesday by disclosing a major Confidence Index for August. This indicator is predicted to extend its losses for the second successive month and could even drift back into contraction. China will then reveal prominent trade values for August which will definitely place traders on edge following recent weeks of high volatility. Imports are expected to have slid by almost 8% and exports are also forecasted to have fallen by just over 6%.
On Wednesday, Great Britain will post its Industrial and Manufacturing Production figures for July. Analysts will be keen to discover if these important sectors are suffering from the impacts of a strong British Pound. The Bank of Canada will then announce its latest rate and monetary easing policies. These decisions could be heavily influenced by constantly declining oil prices. The Reserve Bank of New Zealand will terminated the session by most likely trimming another 0.25% of its official cash rate producing a new figure of 2.75%.
Australia will publish its Labor report for August on Thursday. Expert consensus is presently favoring a modest decline in the unemployment rate to 6.2% and a slender drop in the participation rate to 65.0% from 65.1%. Later, China will issue major inflation figures for August which should rebound to nearly 2% on an annual basis as a direct consequence of current monetary easing policies. The Bank of England (BoE) will complete the day by releasing its latest interest rate and policy decisions. Although no rate movements are expected, investors will still be keen to gain any new insights into when the BoE will instigate its first rate hike.
The USA will bring the week to a close by displaying the first reading of a prominent Consumer Sentiment Index for this month. The monthly survey, conducted by the University of Michigan, should verify a slump to 91.5 this time around.
