Weekly Market Review — September 7-9
Markets Will Be Experiencing A Correction in Anticipation of the Upcoming FOMC Meeting
Almost all the major currencies fell against the US dollar last week. The only exception was the Japanese yen, which showed an increase by 2.24%. The Australian dollar fell most of all— by 3.58%, the New Zealand currency lost 2.70%, the British pound plunged by 1.42%. Smaller losses against the US currency were shown by the Swiss franc, the Canadian dollar and the euro, dropping by 1.04%, 0.6% and 0.31% respectively. The main event of the last week was, of course, the NFP report, which reflects the number of new jobs created in the US economy during the period. According to released data, the unemployment rate was 5.1%, below the forecasted at 5.2%. At the same time, the NFP came at 173K against the forecast of 220K. This mixed statistics reinforced the uncertainty regarding the further actions and decisions of the US Federal Reserve. From the upcoming important news of this week we point out the following. The final assessment of Japan’s GDP will be released on Monday at 23:50 (GMT). Wednesday will be marked by the meeting of two central banks: at 14:00 (GMT) the Bank of Canada will announce its decision on the basic interest rate, followed by the accompanying statement; at 21:00 (GMT) the Reserve Bank of New Zealand will announce the results of its meeting on changing monetary policy, followed by its statement and press conference of the head of the regulator. Australia will report on changes in the number of employees and the level of unemployment on Thursday at 01:30 (GMT). The same day, at 11:00 (GMT), the Bank of England will announce its decision on main interest rate and asset purchase program, followed by its statement.
At the end of the last trading week all the major US stock indexes closed in the red. Stock markets showed the following dynamics: Dow –3,25%, S & P –3,40%, NASDAQ –2,99%. This situation was due primarily to the weak Chinese data which were published on Tuesday and showed that the activity in the manufacturing and service sectors is much lower than predicted. On the other hand mixed Friday’s government report on the US labor market has forced investors to wonder how fast, and most importantly, when the Fed will begin tightening monetary policy. Prospects for the American stock exchanges in the case of increase in interest rates look quite negative.
Major European stock indexes also closed in the red zone. The European stock markets pressured by situation on the stock markets of the Asia-Pacific region, as well as uncertainty about the decision of the US Federal Reserve on its key interest rates at the meeting on September 16-17. The exception was Thursday, when European stock markets received support from the ECB President Mario Draghi, who during his press conference focused on the fact that the program of quantitative easing will be continued as long as inflation does not reach the target levels. And with that, the ECB has lowered the forecast for GDP growth for 2015-2017. Further dynamics of stock indices in Europe will depend entirely on the dynamics of the Asian stock markets, and the economic statistics.
Light Sweet Crude Oil Futures, Daily
The oil prices ended last week at $45.63 per barrel, slightly higher the opening at $45.15 dollars per barrel. The range of fluctuations in oil prices at the same time was quite wide. On Monday quotes were supported by OPEC’s bulletin, which mentioned that the OPEC is ready to participate in negotiations on the stabilization of world oil prices and the market in general. On Tuesday, oil prices have declined significantly, losing all the gains amid another drop of the Chinese manufacturing index, which hasn’t met the expectations of analysts. Recall, China is the second largest oil consumer in the world. Demand from China has a significant impact on the dynamics of oil prices. Market participants are waiting for publication of weekly reports on crude oil inventories in the US, which is scheduled for Tuesday and Wednesday.