Weekly Market Review —January 25–29 2016
US, New Zealand and Japan Central Banks Meetings – The Main Events of the Week
At the end of the week the major currencies closed in varied situations. The increase in relation to the US dollar demonstrated the commodity currencies – Canadian (+ 2.96%), Australia (2.08%) and New Zealand (+ 0.32%) dollars and the British pound (+ 0.07%). The Euro (-1.05%), Swiss franc (-1.39%) and Japanese yen (-1.51%) all fell. The Euro is under pressure after a speech by ECB President Mario Draghi. At the moment, the market expects the expansion of stimulus at the meeting in March. As for the commodity currencies, they are receiving support from the Chinese government in order to support the national economy, which is the largest consumer of commodities. The coming week will be quite busy with a lot of events. On Monday the focus will be on data from the IFO Institute in Germany, the publication of which is scheduled for 09:00 (GMT). On Wednesday, the inflation data in Australia will be presented at (00:30 (GMT)). Also, on this day the Fed will announce its decision on interest rates at 19:00 (GMT). At the same time the accompanying statement will be presented. In addition, a similar decision will be announced by the Reserve Bank of New Zealand at 20:00 (GMT), after which there will be an accompanying statement. On Thursday at 09:30 (GMT) the UK will report on changes in its GDP in the fourth quarter of last year in their preliminary assessment. On Friday, a decision will be announced by the Bank of Japan’s monetary policy settings at 04:00 (GMT). At 10:00 (GMT) the Eurozone will report on consumer inflation, and at 13:30 (GMT) US and Canada will provide data on changes in GDP for the fourth quarter preliminary estimates.
The first half of the previous trading week, major US stock indexes held a downward trend, helped by concerns over a slowdown in the second largest economy in the world – China. Another reason for the negative dynamics was oil, which last week fell below $38 a barrel. However, the expectation of expanding stimulus measures by the Chinese government supports the commodity markets, which in turn, promotes the growth of the stock markets. The head of the ECB, Mario Draghi said that EBC will provide loose monetary policy in future. This week the dynamics of the stock markets will be influenced by the meeting of the Fed and the Bank of Japan, to be held at the end of the week. At the end of the trading week: Dow + 0,66%, S & P + 1,41%, NASDAQ + 2,29%
The stock exchanges in Europe demonstrated the same dynamics. The reason for the fall in stock markets during the first half of the trading week was mixed statistics on the Chinese economy. For example, industrial production and retail sales showed a decline, while GDP went exactly as expected. After a report from the Chinese government that it will continue supporting the national economy, stock markets shifted to growth. Significant support was provided by the European regulator comments head Mario Draghi, who said that expansion of incentive for national economy is possible, and it will be adopted at a meeting in March.
Light Sweet Crude Oil Futures, Daily
Last week the quotes showed growth for the first time in three months. Meanwhile, during the first half of last week crude oil was trading below $30 per barrel. It was promoted by a surplus on the world market, as confirmed by reports on stocks of the Institute of Oil and the Ministry of Energy. In addition, it was reported that Iran gave a significant discount to its European customers. However, the levels reaching below $30 a barrel were only a temporary stop. Recently, the market has seen some rebound in oil prices against the background of short covering. Investors prefer to lock in profits after a strong fall in the current year. In addition bad weather in the US and Europe increased the demand for oil. Against this background, some investors decided to buy oil at the most advantageous prices for themselves, which led to a significant increase in prices. Despite this, the prospect for oil in the medium term remains negative.