Weekly Market Review — February 1 – 5 2016
Main Event This Week – U.S. Non-Farm Payrolls (NFP) Report
Most of the major currencies showed mixed dynamics at the end of the week. The largest decline against the US dollar was shown by the Japanese yen (-1.91%). Smaller declines were recorded by the Swiss franc (-0.93%), the New Zealand dollar (-0.11%) and British pound (-0.09%). The Australian dollar (+ 1.13%), Canadian dollar (+ 0.72%) and the Euro (+ 0.38%) all showed growth. During the first half of the week the US currency became cheaper upon expectations of the Fed Interest Rate Decision, which took place on Wednesday. There were some concerns about a global economic slowdown and its impact on the US economy. Nevertheless, during Friday’s session the US dollar recovered losses. This was due to Japan’s yen falling. Many experts believe that against this backdrop, investors will withdraw their investments from Japan and go into US assets, which would support the dollar. The news in the coming week will be quite intense – on Monday the focus of market participants will be on China’s Caixin Manufacturing PMI, which will be published at 01:45 (GMT). Also the U.S. Real Personal Consumption, which will be presented at 13:30 (GMT) will be important. Tuesday sees a meeting of the Reserve Bank of Australia, the results of which will be known at 03:30 (GMT). Also, data on the labor market in Germany, the Eurozone and New Zealand, which will be published at 08:55 (GMT), 10:00 (GMT) and 21:45 (GMT), respectively will have some effect on Tuesday too. On Wednesday, the UK Services PMI at 09:30 (GMT), Eurozone Retail Sales at 10:00 (GMT) and the US ADP Nonfarm Employment Change at 13:15 (GMT) will hold traders attention. On Thursday at 12:00 (GMT) there will be s Bank of England Inflation Report, and at 15:00 (GMT) data on U.S. Factory Orders will be of note. Finally, on Friday, the long awaited NFP report at 13:30 (GMT) will be presented. At the same time, Canada is to publish its data on the labor market.
Last week, the situation in the oil market weighed heavily on traders’ minds. Also, the quarterly reporting season in the United States made quite the impact. Meanwhile, investors were focused on the US Federal Reserve’s meeting. According to the FOMC statement, the American regulator is concerned about the situation in the world economy, and the possible negative impact on the US economy. This put some pressure on US stock markets. However, during the second half of the week the US stock market recovered almost all losses, helped by the recovery in oil prices. The publication of US GDP on Friday provided great support to stock markets. Investors think it could impact Fed rate hikes. This week all investors will pay attention to the NFP report, which will be released on Friday. At the end of the trading week: Dow + 2,07%, S & P + 1,38%, NASDAQ + 0,12%
European stock markets during this week were highly dependent on published statistics. So, the main indicator – inflation, has shown some signs of growth in the Euro area. However, investors will continue to follow the Eurozone economic statistics to determine the possibility of extension of stimulus measures by the ECB. Some support to stock markets in Europe was provided oil’s price growth. Also, the expansion of stimulus measures by the Bank of Japan had a positive impact on the European markets. On Friday, the Bank of Japan decided to lower the interest rates on deposits to negative values. This week, stock markets will be affected mainly by economic statistics from China, the Bank of England decision on interest rates and the NFP report.
Gold; which is traditionally used as defensive asset, last week showed positive dynamics. This was due to the Fed Interest Rate Decision. Despite the general strengthening of the US dollar during the second half of the week, gold continued to grow. The Bank of Japan’s decision provided some support to the gold market. In addition, the US GDP grew less than expected. The slowdown in the world’s largest economy may force the Fed to postpone the next rate hike, which is favorable for gold. Also, gold will get support from the high demand for it on Chinese New Year’s Eve, fast approaching