Weekly Market Review — November 16–20, 2015
CPI Reports in UK, US and Canada Will Be Main Events of the Week
At the end of the week most of the major currencies closed above zero against the USD. The highest growths in relation to the US currency were shown by the Australian dollar (1.21%) and the British pound (1.21%). Smaller gains were obtained by the Japanese yen (0.44%), the euro (0.25%) all the New Zealand dollar (0.22%). The currencies that fell were the Swiss franc (–0.05%) and the Canadian dollar (–0.15%). Last week’s positive correction of the major currencies against the USD was a counter-reaction to the rapid growth of the US dollar occurring on the background of impressive statistics on the US labor market. This has renewed expectations of an imminent rate hike by the US Federal Reserve. Fed officials, who spoke last week, confirmed the market’s expectations, pointing to the fact that December is the best time for such a step. The coming week will not be filled with many important economic statistics. Market participants should pay attention to the publication of the Consumer Price Index in the Eurozone in the final assessment at the 10:00 (GMT) on Monday. Tuesday will feature two important inflation reports, in the UK at 09:30 (GMT) and the US at 13:30 (GMT). The main event on Wednesday will be the publication of the US Federal Reserve last meeting’s minutes, scheduled for 19:00 (GMT). On Thursday, the focus will be on the data on Retail Sales in the UK, to be published at 09:30 (GMT). Finally on Friday we’ll see the inflation report and data on Retail Sales in Canada at 13:30 (GMT).
At the end of the trading week, major US stock indexes showed the following dynamics: Dow dropped by 3.71%, S&P lost 3.63%, Nasdaq showed the largest decline by 4.26%. Such dynamics were triggered by news from the Chinese economy, where its government intends to expand its stimulus program. Also, some pressure came from falling commodity prices, especially oil. In addition, the market experienced disappointing US corporate quarterly reports. More recently, US data on Retail Sales was published on Friday, which pointed to a slowdown in consumer activity. The greatest pressure however comes from expectations of an upcoming rate hike by the US Federal Reserve at its meeting in December, after some Fed representatives confirmed that the US regulator intends to make the move.
European stock markets are also under pressure due to negative news on the Chinese economy, pointing to a global slowdown of the world economy. In addition, several disappointing economic indicators for the Eurozone economy, which were released last week, also had a downward pressure on the stock markets. However, the European securities markets were supported by expectations of an ECB decision to expand its stimulus measures. Moreover, the head of ECB repeatedly talked about the likelihood of such a step during their December meeting.
Light Sweet Crude Oil Futures, Daily
Last week the quotations of “black gold” were trading in a downward trend, which was caused by the strengthening of the American currency. Meanwhile, the oversupply in the world market also had an effect. On the demand side, the United States reported an increase in inventories of raw materials in the US economy, signaling a lower demand for the short term. It is worth noting that the International Energy Agency lowered its forecast for the oil demand for 2016. In the near future the focus of investors’ attention will be on the conflict in the Middle East and the negative expectations for the OPEC meeting, which will take place on December 4th this year. All these factors together indicate the predominance of a negative future dynamic for the oil market.