19th May 2014 - Global Economics - The Week Ahead
Global Market Data as of 19th May 2014
FTSE 100 6,855.81 (+0.22%) Dax 9,629.10 (-0.28%)
CAC 40 4,456.28 (+0.26%) BEL 20 3,098.15 (-1.88%)
Madrid IBEX 10,478.70 (+1.10%) Zurich SMI 8,683.62 (+0.45%)
Moscow MCIEX 1,387.56 (+0.23%) Sydney ASX 5,390.30 (-1.26%)
Nikkei 225 14,006.44 (-0.64%) Hang Seng 22,628.81 (-0.37%)
Shang SSE Comp 2,003.75 (-1.12%)
Dow Jones 16,491.31 (+0.27%) NASDAQ 4,090.59 (-0.24%)
S&P 500 1,877.86 (+0.37%)
Asian markets started out optimistic on Monday after news that Narendra Modi was to be India's new Prime Minister, however this soon changed with the Nikkei losing early gains and reaching close to one month lows in afternoon trading. Last week saw good GDP growth reported out of Japan, up 1.5% on the previous quarter which saw only 0.1% growth. The Bank of Japan has been on an aggressive asset purchase plan and although they meet later this week it is expected that there will be no policy change at this time. With what appears to be a return to normal capital flows in Japan the BoJ is probably going to have to wait and see what happens in the next three months before it can make any changes. The hike in Sales tax at the beginning of April was probably the reason behind such strong GDP for the first quarter as many an individual and company made significant purchases before the 3% tax increase. Later in the week we see data out of China and as the government there looks to police its banking sector analysts will be keen to see what the Central Bank of China will announce as it hopes to achieve its growth forecasts for the year.
European markets are expected to open slightly higher today and should look to stay close to the highs they have seen this past week. With all eyes on the ECB's meeting early next month the European Central Bank will either announce its stimulus plan or again push out the date of any stimulus plan they may implement for another month. Mario Draghi has repeatedly suggested that reforms are due and that the ECB is prepared to react as and when its feels it is necessary however with good economic data being seen in the majority of its members it is fair to say that the Eurozone is a tentative place at the moment and investors will been keen to see what the ECB has in store. Any rate increase would be seen as a positive step however a FED Reserve style bond buying scheme could be on the cards. Today, Construction figures for the EU will be reported with a significant reduction being forecast. Analysts are expecting a contraction in the region of about 3%, being down from 6.7% the previous year. Later in the week there are further indicators such as Consumer Confidence on Wednesday and Thursday will see a host of Markitt data on Manufacturing, Services and Comp PMI.
Markets in the US finished off the week well with both the S&P 500 and the Dow Jones closing out close to their all time highs, pushing analysts confidence in the right direction. Positive housing data on Friday helped hold the indexes and only the NASDAQ felt the pinch after a continued tech sell off. As with Europe, the US will be keen to see what data is produced this week and also what Janet Yellen will have to say after the FOMC meeting on Wednesday. Little is expected to change with the FED and considering Ms. Yellen has said pretty much the same thing each time she has spoken will do little for some and will solidify much for others. The continued reduction in bond buying and a rosy outlook on the US economy are expected to be repeated and very few expect anything else to be announced. As the week draws on more data will be released and after Wednesday is when the real information comes out. Thursday see's Jobless data, a range of PMI figures and Existing Homes Sales data should all be well received after Wednesdays FED speech.
The markets should stay relatively calm this week as the world's central banks look to inflation and whether rate increases are now due to be implemented. What to watch this week? M&A action is abound with Pfizer looking to tie up their AstraZeneca bid, AT&T chasing DirectTV and of course, more information on the Alibaba IPO, potentially the largest release in US history.
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