Weekly Market Review — November, 9–13
US Economic Statistics Will Be in the Focus This Week
All the major currencies showed a decline against the USD at the end of the week. The largest decline against the US dollar was experienced by the New Zealand dollar (–3.61%). Smaller declines were felt by the British pound (–2.41%), the Euro (–2.33%), the Japanese yen (–2.11%), the Swiss franc (–1.92%), the Canadian dollar (–1.68%) and the Australian dollar (–1.17%). Last week was all about the strengthening of the US currency. Friday’s report on the NFP triggered a peak, which may force the Fed to raise rates at its meeting in December. Recall that the data released on Friday exceeded by far the analysts’ forecasts. It is worth noting that all the economic reports on the US economy that will come out before the meeting, will be closely monitored by market participants. This week also promises to be busy with economic reports. Monday we’ll have the data on the Current Account and Trade Balance in Germany, to be published at 07:00 (GMT). The Chinese Consumer Price Index will be released on Tuesday at 02:00 (GMT). On Wednesday market participants should pay attention to a report on the UK labor market, to be published at 09:30 (GMT), as well as to a speech by ECB’s President Mario Draghi at 13:15 (GMT). Australia will publish its report on labor market on Thursday at 00:30 (GMT). Further on, Friday we’ll have France, Germany and the Eurozone report on their respective GDP’s at 06:30 (GMT), 07:00 (GMT) and 10:00 (GMT), respectively.
The major US stock markets finished the week in positive territory, showing the following dynamics: Dow rose by 1.31%, S&P showed a gain of 0.86% and the Nasdaq rose by 1.75%. The trading was influenced by positive statistics on the US economy. The second factor, which had a positive impact on the stock markets, was the series of quarterly corporate reports. Last week’s reports showed on average better results than expected. It should be noted that after the publication of the quarterly reports, investors will switch their attention to the economic statistics on the US, as they will clarify the situation regarding the timing of the first rate hike. Recall that, in the case of a rate increase, the stock market will be under pressure as the cost of corporate debts would increase.
The main European stock markets were trading erratically last week. Such dynamics were caused, on one hand, by the economic statistics from the region, while on the other hand they were also influenced by the ongoing season of quarterly corporate reports. Meanwhile, there was also some support from speeches and comments of the ECB members, including its president, Mario Draghi. Recall that the ECB President affirmed at the last meeting that the expansion of the quantitative easing program is likely. The expectations for such a move by the ECB has boosted the stock markets. As a negative influence, the expectation of an early rate hike by the US Federal Reserve pressured the stock markets in Europe as well.
Gold continues to trade in a clear downtrend. It was pushed down after the last meeting of the US Federal Reserve, which reassured investors it will raise rates soon, if the economic situation will be positive enough. Markets have gotten enough proof of strength of the US economy during the week. In addition, Friday’s government report on the NFP, came out much better than analysts’ expectations and has added pressure to the market. Therefore, gold will remain under pressure on expectations of monetary tightening by the US Federal Reserve, since gold becomes unattractive to investors amid a rate hike.