Weekly Market Review —January 11–15 2016
Main Event This Week – The Bank of England’s Interest Rate
At the end of lastweek most of the major currencies closed below zero. The highest growth against the US dollar was the Japanese yen (3.33%). The Euro showed growth (+ 0.50%) too. All other currencies fell – the Swiss franc (-0.33%), Canadian dollar (-1.49%), British Pound (-2.48%), the New Zealand dollar (-2.69%) and the Australian dollar (-3.03%). Last week was strongly influenced by the negative Chinese economy. Traditional defensive assets, such as the Yen and Swiss franc are in high demand at times like this. It should be noted that the Euro is also in demand as a funding currency. The most important event of last week was, of course, the NFP report. The Data on the US labor market came out better than the most optimistic forecasts of experts, showing that the US economy is in good condition. This report was important for market participants in terms of the future prospects of rate hikes by the US Federal Reserve. There won’t be a lot of economic statistics during the coming week. Nevertheless, market participants should pay attention to the publication of data on industrial production in the UK, which will be presented on Tuesday at 09:30 (GMT). On Wednesday at 10:00 (GMT) the same report will be published on the Eurozone economy. On Thursday, Australia will report on the labor market at 00:30 (GMT), and at 12:00 (GMT) the Bank of England will announce its decision on interest rates. On Friday publication of data on retail sales in the United States in 13:30 (GMT) may cause some interest. At 14:15 (GMT) the index of industrial production in the United States will be published.
Major US Stock Markets spent the past week in a downward trend, due to the publication of weak statistics on the Chinese economy. According to the data, the business activity index for the manufacturing and service sectors in China fell short of experts’ expectations, prompting doubts among investors about the strength of the second largest economy in the world. Because of negative statistics. The People’s Bank of China lowered the national currency rate several times, which negatively affected the commodity markets and the currencies of the commodity bloc, respectively. Against the backdrop of falling energy stocks, even the impressive data on the NFP report could not support the US Stock Market. At the end of the trading week the figures were as follows: Dow -6,19%, S & P -4,32%, NASDAQ -7,26%.
European Stock Markets repeated American dynamics. Against the background of negative statistics and the double devaluation of the Chinese currency, in Europe the stock market fell substantially. In addition, statistics on the Eurozone economy felt negative pressure. Also, investors were focused on the conflict in the Middle East between Saudi Arabia and Iran. Meanwhile, the panic among investors about European Stock Markets came after the news from North Korea that they were testing a newly designed nuclear bomb. This week the main events for investors to focus on will be data on industrial production in the Eurozone, the UK and the US.
Light Sweet Crude Oil Futures, Daily
Quotes of “black gold” have come under significant pressure against the background of a number of factors. Firstly, the problem with the Chinese economy, which is the second largest consumer of oil. Secondly, – the ongoing conflict between the two major oil-producing countries – Saudi Arabia and Iran, which could provoke a confrontation within the OPEC. And thirdly, more political factors: North Korea testing their new nuclear bomb, which could lead to further destabilization of the political situation in the region. Against this background, investors preferred to get rid of risky assets, such as oil. Although statistics on the stocks of the Institute of Petroleum and the US Department of Energy point to their decline, “black gold” continues to fall against the backdrop of market saturation.