Economic events of the Week

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Monday: November Retail Sales are due in Spain, following a Year over Year decrease of -0.6%, expectations are low for this one. The other side of the European continent expresses more optimism as December’s Italy Business Confidence is analyst surveyed to indicate a 0.9 point improvement. The day will conclude with the publishing of Consumer Price Indices in Russia.

Tuesday: The day will see mostly U.S. data, namely the publishing of the Chicago Purchasing Managers’ Index and the Consumer Confidence Index.

Wednesday: The first day of 2014 will see the publishing of the official Manufacturing Purchasing Managers' Index in China.

Thursday: The unofficial HSBC/Markit Manufacturing Purchasing Managers’ Index is due and is expected to present a more pessimistic image of Chinese economy with an analyst estimation of 50.5 points vs. the official PMI’s 51.2. The day will also see the publishing of Manufacturing Purchasing Managers’ Indices throughout the Eurozone, namely Italy, France, Germany and the U.K. U.S. Initial Claims, U.S. ISM Manufacturing and ISM Prices Paid are due later that day.

Friday: Europe will draw most of the day’s attention. The busy day will start as the nationwide House prices will be published in the U.K. Analysts expect the figure to be revised upwards from an annual increase of 6.5%, recorded last month, to no less than 7.1% on this month’s figure. Preliminary estimations of the Spanish CPI are also due. More attention will be taken by the U.K. real-estate sector with the publishing of November’s mortgage approvals – analysts expect this figure to continue increasing. Italian Consumer Price Index and Spanish Unemployment will also be published. 

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More signs of recovery

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The EUR/USD rate was not the only financial asset to set new records last week. On Friday, the U.S. 10-year yields finally surpassed the 3% landmark. This is quite a latent, but not entirely unexpected reaction to the previous week’s tapering. In spite of the 10 year yields already surpassing 3% in September 2013, that case is mostly attributed to volatile anticipation for tapering, but this time the tapering is a solid, given fact. The U.S. 10 year yield serves as a benchmark for numerous interest rates. These range from those affecting the real-estate market, such as mortgages, to those fueling equities such as corporate bonds. The low corporate bond interest rates have been regarded as catalysts of soaring equity prices lately. These led to the S&P 500 rising by nearly 30% since the beginning of the year. Likewise, the low mortgage rates in the U.S. may be regarded as primary contributors to the FHFA U.S. House Price Index recording an 8.2% annual increase in October. The affect higher U.S. Government bond yields would have on U.S. assets such as equities and real estate remains to be seen. Register at ANYOPTION and start trading TODAY!

Strong Euro weights down on Eurozone’s recovery

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As Christmas was celebrated by the Christian world last week, it also carried a considerable portion of market participates away from their trading screen, leading to the tradition annual decrease of volumes. Following a rather muted trading week, EUR/USD reached a 2.5 year peak on Friday. The record price was achieved after the EUR strengthened versus the USD by nearly 1.5% during the day, to approximately 1.389 USD. The current level represents nearly a 15% strengthening of the Euro versus the USD since July 2012’s 1.2 levels.

Consequently, the current EUR/USD levels are going to present a bigger problem for European exporters, as those would receive less Euros for their foreign currency to fund their operations. Alternatively, local producers might have a harder time competing with global supply. For example, Germany’s Import Price Index, published on Monday, indicated an annual -2.9% decrease. Undoubtedly, the strengthening Euro had some part in this. 

While the strengthening Euro may be regarded as an equal problem to all Eurozone members, a bigger issue might be the fact that not all of these members had equally recovered from the great recession. For instance, Germany’s GDP currently increases at an annual pace of 1.1%, supported by a quarterly increase of 0.1% in exports. The French GDP, however, was published last week and indicated a muted 0.2% increase, handicapped by a -1.3% decrease of exports during the last quarter. Evidently, not all shared sorrows are halved sorrows. 

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Strong Euro weights down on Eurozone’s recovery

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As Christmas was celebrated by the Christian world last week, it also carried a considerable portion of market participates away from their trading screen, leading to the tradition annual decrease of volumes. Following a rather muted trading week, EUR/USD reached a 2.5 year peak on Friday. The record price was achieved after the EUR strengthened versus the USD by nearly 1.5% during the day, to approximately 1.389 USD. The current level represents nearly a 15% strengthening of the Euro versus the USD since July 2012’s 1.2 levels.

Consequently, the current EUR/USD levels are going to present a bigger problem for European exporters, as those would receive less Euros for their foreign currency to fund their operations. Alternatively, local producers might have a harder time competing with global supply. For example, Germany’s Import Price Index, published on Monday, indicated an annual -2.9% decrease. Undoubtedly, the strengthening Euro had some part in this. 

While the strengthening Euro may be regarded as an equal problem to all Eurozone members, a bigger issue might be the fact that not all of these members had equally recovered from the great recession. For instance, Germany’s GDP currently increases at an annual pace of 1.1%, supported by a quarterly increase of 0.1% in exports. The French GDP, however, was published last week and indicated a muted 0.2% increase, handicapped by a -1.3% decrease of exports during the last quarter. Evidently, not all shared sorrows are halved sorrows. 
 
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Strong Euro weights down on Eurozone’s recovery

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As Christmas was celebrated by the Christian world last week, it also carried a considerable portion of market participates away from their trading screen, leading to the tradition annual decrease of volumes. Following a rather muted trading week, EUR/USD reached a 2.5 year peak on Friday. The record price was achieved after the EUR strengthened versus the USD by nearly 1.5% during the day, to approximately 1.389 USD. The current level represents nearly a 15% strengthening of the Euro versus the USD since July 2012’s 1.2 levels.

Consequently, the current EUR/USD levels are going to present a bigger problem for European exporters, as those would receive less Euros for their foreign currency to fund their operations. Alternatively, local producers might have a harder time competing with global supply. For example, Germany’s Import Price Index, published on Monday, indicated an annual -2.9% decrease. Undoubtedly, the strengthening Euro had some part in this. 

While the strengthening Euro may be regarded as an equal problem to all Eurozone members, a bigger issue might be the fact that not all of these members had equally recovered from the great recession. For instance, Germany’s GDP currently increases at an annual pace of 1.1%, supported by a quarterly increase of 0.1% in exports. The French GDP, however, was published last week and indicated a muted 0.2% increase, handicapped by a -1.3% decrease of exports during the last quarter. Evidently, not all shared sorrows are halved sorrows. 
 
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Economic events of the week

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Monday: In Japan, the Tankan Large Enterprises All Industries Index will be released. In France, preliminary figures for the Purchasing Managers’ Indices in the Manufacturing and Services sectors will be released. Later that day, similar Purchasing Managers’ data will be published for Germany and the Eurozone’s aggregate. In the U.S., Empire Manufacturing Survey will shed some light on how manufacturing executives in the state of New York see the future of the economy. Additionally, U.S. November Industrial Production data will be published, while analysts currently estimate these to revert to positive territory, following last month’s -0.1% decline.

Tuesday: Producer Prices will be published in the U.K., followed by Consumer Prices, both are expected to present moderate to negative figures. German Industry will later take the focus with the publishing of the ZEW surveys, both “expectations” and “current situation”. The Eurozone’s aggregate CPI will also see light, but these are not expected to draw the most market attention, as it follows a previous annual figure indicating only a 0.9% increase. U.S. Consumer Prices and Current Account balance are due to conclude the day.

Wednesday: The day will kick off with Japan releasing its trade balance figures, which may cause some volatility in the USD/JPY. Later the day, IFO surveys will be published in Germany: “Business Climate”, “Current Assessment” and “Expectations”. U.K. labor data will see light in the form of Jobless Claims Change and the ILO Unemployment rate. The U.S. will see some housing data in the form of MBA Mortgage Applications, as well as Housing Starts. Later that day, the Fed is due to release its FOMC rate decision, that will hopefully provide some forward guidance on the future of its monetary policy.

Thursday: The All Industry Activity Index will be released in Japan. This will be followed by some Retails Sales data in the U.K. and then the U.S. Initial Jobless Claims, in hope of recovering from last week’s negative figure. 

Friday: Eurozone Consumer Confidence Figures are due. 

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The shutdown deal hit markets

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What started as a rather drowsy week, quickly escalated into something more upbeat, when on Wednesday a deal was reached in Washington: the Republican-dominated House of Representatives passed a two-year compromise-spending plan, aimed to prevent shutdowns in the future. The plan entailed a cut in the U.S. Government budget, leading to a reduced budget deficit. On the surface, this was good news for the markets, as the previous shutdown has had quite a devastating effect on the U.S. economy as a whole, and specifically the U.S. labor market. However, as the Fed is probably aware of the former fact and the brighter path it paves for U.S. employment, it was also natural to assume tapering is closer at hand.

Equity markets retorted with a swift, albeit moderate, nudge downwards; The S&P500 lost about -0.5% as the news spread. The same pessimistic sentiment continued to provide negative pressure on equity prices throughout the day. However, that was haled on Thursday as the Department of Labor’s Initial Jobless Claims surged to 368K, an increase of 68K from the previous week's revised figure of 300K. For reference, the last time Initial Claims saw such levels was nearly two months ago, on the week ending October 4th, shortly after the Government shutdown. Needless to mention, the hike of initial claims pushed markets back towards "taper off", at least for the time being. Not only that, Retails Sales figures also presented an allegedly positive 0.7% Month over Month increase, but this seems to be mostly the result of Auto sales, as Retail Sales (Less Autos) presented a more moderate 0.4% increase… so that also helped ease tapering concerns. 

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Trading the taper

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On Monday, Europe received an alarming reminder that the great recession is still with us. The Greek GDP presented a Year over Year decrease of a rather depressing -2.9%. Analyst expectations anticipated a much moderate -1.7% decrease. Moreover, breaking down the change of different components in the index helped support the belief that weak demand factors were among those leading to the negative print; Durables such as Furnishing presented a -1.4% monthly decrease, while Clothing and footwear presented a -9.8% decline.

Tuesday supplied some more weak-demand evidence, but this time on the U.S. front. The U.S. Census Bureau revealed that day that Wholesalers Inventories presented a whopping 1.4% monthly increase in October, much larger than analyst estimation, which predicted a more moderate 0.3% increase. While the figure will necessarily trickle down to the US Q4 GDP, when it will be released, it is hard to believe that this is the way hoped to exit the great recession. 


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Economic events of this week

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Monday: Consumer and Producer Price Indices are due in China. Analysts expect further expanding of the two price indices as strong local private demand continues pushing the CPI higher amid moderate global demand. Industrial Production is also due in Germany.

Tuesday: The October Tertiary Industry Activity index is due in Japan. Industry activity will also be monitored by the release of Industrial Production in China, France, Italy and the U.K. China will also publish that size of its money stock.
 
Wednesday: Machine Orders data will be released in Japan – Analysts predict that Abe’s efforts will put us on a 15.1% increase versus last year. Domestic Corporate Good prices will also be published in Japan, with a previous print of Year over Year increase of 2.5% and analysts’ expectations for 2.7% to be published on Wednesday, Japan seems further away from the liquidity trap. The final estimation of the Consumer Price Index in Germany will also see light. 

Thursday: The French CPI is scheduled to see light, but the stagnant state of the local economy will make it quite difficult for prices to rise much higher. U.S. Initial Claims will make their weekly appearance. 

Friday: The Consumer Price Index will be released in Spain and in the U.S. 

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On both sides of the Atlantic

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Wednesday sported an opportunity for U.S. data to shake the markets. Initially, the ADP employment change was released, and presented a very impressive increase of 215,000 jobs in the U.S. economy during November. When the promising data started advocating the tapering of QE3, it also sent the USD to strengthen nearly 0.5% versus the EUR. However, the day did not stop there, as the ISM Non-Manufacturing Composite Index was released shortly after, with less appeasing results. The negative 53.9 figure dispersed some of the QE3 tapering concerns, weakening the USD back to the 1.36 levels versus the EUR, where it started at. Equity reiterated their example for the “Bad news is good for stocks” paradigm, as the S&P500 gained approximately 0.7%.

Thursday saw a rather expected decision by the Bank of England to keep the official bank rate at 0.5%. The day’s protagonist, on the other hand, is probably the Department of Labor’s Initial Jobless Claims report, which indicated only 298,000 Initial Claims were submitted during the previous week. The last time this occurred was September and the figure has since surged to as high as 737,000, due to the Government’s shutdown. However, it seems that optimism regarding the labor data was already priced in the markets, as a result of the previous day’s positive ADP figure. Evidently, markets saw little change following the print.

Friday was somewhat of a different story. The day started with very positive indications regarding the U.S. labor market. These included U.S. Nonfarm Payrolls adding 203,000 Jobs in November, and perhaps more importantly U.S. Unemployment dropping to a level of 7.0%. Stock derivatives’ immediate response was to lose about 0.5%. Taper-induced trading was also evident in gold which took quite a blow and of course the USD which strengthened by almost 0.3% versus the EUR. Interestingly, things did not stop there - when the official trading started market opening was on average a tad higher than the previous day’s close. However, soon after that euphoria spread around equity markets, which lead both the Dow and S&P 500 to close their trading days more than a percentage point higher than the previous day’s close. 

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Different news makes markets volatile

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Last week the PMI releases delivered on their highly anticipated comeback. It started with Manufacturing Purchasing Managers’ Indices showing mostly positive figures around the Eurozone. These included Italy, with a print of 51.4 versus the anticipated 50.8 and Germany with 52.7 versus expectations for 52.5, not to mention the U.K.’s PMI, which scored no less than 58.4 points, 2.3 more than analysts had predicted. Expectations for increased local demand seem to have weakened the Euro as it began trading at around 1.3540 USD soon after the release of the PMIs, 0.5% below the levels that were traded just before their release. 

The Euro’s upside, however, came from a rather unpredictable front, as Tuesday saw surprising pessimism in its equity market. The German DAX index lost nearly 2% during the trading day, while the Paris CAC 40 presented even higher losses. One asset’s pessimism is another’s opportunity, it seems; as the Euro’s weakness from the previous day diminished rather entirely, with EUR/USD trading back at around 1.3600 levels. 

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Economic Events of this week

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Monday: Japan’s third quarter Capital Investment data will be published, analysts expect it to indicate an annual 2.8% increase, versus a previous, completely muted figure. In China, “Fiscal forward guidance” will be provided by the HSBC Manufacturing Purchasing Managers’ Index. Manufacturing PMI survey results will be published in Italy, France, Germany, and the U.K. the U.S. will see the Markit, and the ISM PMIs being published. 


Tuesday: Japan’s Monetary Base will be published; following October’s figure indicating no less than a 45.8% annual increase of currency in circulation at the BoJ’s vaults. Spanish Unemployment data is also due that day. 


Wednesday: PMI Indices for the services sector will be published throughout the Eurozone. Additionally in the Eurozone, the Preliminary Q3 GDP figure will be published, as analysts expect a barely positive quarterly increase of 0.1%. In the U.S., MBA mortgage applications are due with much anticipation, given last week’s surge of building permits. Some U.S. labor data will be provided by the ADP National Employment report. Later that day, the U.S. Trade Balance data for October and U.S. New Home Sales data will be published. 


Thursday: The BoE will announce U.K.’s bank rate, currently set to 0.5%. Public interest will probably be drawn to the ECB’s rate announcement later that day. U.S. Initial Jobless Claims data will be published, as well as the U.S. 3Q GDP’s second estimate. The day will conclude with the U.S. Factory Orders data. 


Friday: Unemployment Rate will be published in the U.S., providing further guidance on when Bernanke\ Yellen will finally have justification to start tapering. U.S Consumer data is also due with the publishing of Personal Income and Spending figures for October, as well as the University of Michigan’s Consumer Confidence Sentiment. 

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Black Friday optimism

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Friday presented opportunity for market optimism on both sides of the Atlantic. The Eurozone saw positive data published regarding the demand side, with prices increasing by an estimated 0.9%. Unemployment also provided its fare share as it decreased to 12.1%. That supported the German DAX index and the Spanish IBEX35, closing the week at +1.6% and +1.1% weekly increases respectively. At first, U.S. markets didn’t appear to need any data derived support; Although no positive figure was released in the U.S. on Friday, markets opened with a positive trend, due to optimism based on what appeared to be strong "Black Friday" consumer demand. The S&P 500 gained +0.2% throughout the trading day and the NASDAQ and DJIA complimented with similar figures. This reverted, however, as reports from leading U.S. retailers suggested local demand wasn't as strong as it seemed, leading both the Dow, as well as the S&P to conclude the day in negative territory. Register at ANYOPTION and start trading TODAY!

Positive data-backed momentum

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Last week, equity trading provided another opportunity to admire the optimism recently present in the markets.

The week kicked off with the NASDAQ composite index topping over 4,000 points. Market belief that the Fed’s market supporting actions will continue was presented too – the increase of bidding over bonds offered by the U.S. Treasury led Monday’s Bids-to-Cover ratio up to 3.54, an impressive jump from October’s 3.09. Moreover, the interim deal concluded between the P5+1 and Iran over Iran’s nuclear program helped nudge oil prices downwards, which fueled corporations' expectations for cheaper forthcoming energy prices.

Tuesday, provided an opportunity for the NASDAQ to really shine as it passed the 4K mark again, and closed the trading day there, for the first time in 13 years. The positive trading day was backed by U.S. Building Permit statistics, which indicated that 1,034K annualized new permits were granted in October. On the one hand, this is the highest figure since January 2008. On the other hand, it could be a latent response to the recent Federal Government Shutdown, so it will be interesting to re-examine those figures in November.

 The day also saw the Conference Board's Consumer Confidence Index losing two points to a level of 70.4. The same positive momentum continued on Wednesday as Initial Jobless Claims dropped by 10K versus the previous week. 

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Economic events of this week

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Monday: October’s Pending Home Sales will be published in the U.S., following a nosedive recorded last month. The Dallas Fed Manufacturing Outlook will also be published. 

Tuesday: The Consumer Confidence Index will be published in Italy, the current analyst estimation is that data will not prove optimistic. In the U.S., Housing starts and the Consumer Confidence Index are due. 

Wednesday: Retail Sales data will be published in unemployment-struck Spain. Third quarter’s preliminary GDP data will be published in the U.K., where analyst predict a nearly continent-leading 1.5% year over year growth. MBA Mortgage Applications are due in the U.S. Initial Jobless claims will also make their weekly appearance, in yet another attempt to revert to pre-shutdown levels. U.S. Durable Goods New Orders and the University of Michigan’s Consumer Confidence Index will also be published.

Thursday: The final figure of Spain’s 3Q GDP data will be published. Preliminary inflation figures are also due, as the weak local demand makes analysts predict only a 0.2% annual increase of prices. Unemployment will be published in Germany, following a 6.9% figure recorded during last month. 

Friday: Jobless Rate and Consumer Price Index will be published in Japan. Preliminary Industrial Production figures are also due. Nationwide House Prices will be published in the U.K., while anticipation is for the continued surge of house prices as analysts predict the figure to present a 6.2% annual growth of prices in November, versus 5.8% in Oct. Later that day, the U.K. Mortgage Approvals will be published. The Eurostat will publish its flash estimate for the Eurozone’s Consumer Price Index. 

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Growing debate over QE

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David Stockman, budget director of former U.S. President Ronald Reagan, appeared on FoxTV last week and said that the Fed's expansionary policy is again leading to the inflation of asset prices, similar to what occurred prior to the Great Recession. Stockman said that “It's 2007-2008 all over again”, adding different statistics to support this premise. For instance, Stockman noted that the Small Cap Russel 2,000 index went up 43% during the recent year, while the earnings of the firms in it did not increased, and that junk bond issuances are far greater now than they were in 2007. When confronted with the claim that major aggregates are only 15-16 times earnings to equity Stockman replied that bubbles don't form in the heart of the Dow, but rather out on the specular periphery, giving the real estate as an example for speculative assets.

More QE talks came from a nontrivial source, the former Governor Candidate Larry Summers. In a Bloomberg interview, Summers initially supported the easing by noting: “on the question on whether the Fed stepping up and providing liquidity when no one else would was the right thing to do? I think historians are going to judge that about 98 to 2”. On the other hand, Summers also advocated the use of fiscal rather than monetary actions such as in fixing Kennedy Airport “which is in a shambles”, or "doing something about 25,000 schools across the country, where paint is chipping off the walls". 

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When rumors appear brighter than the news

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EUR/USD trading last week was subject to breaking events from both sides of the Atlantic. New York Fed President Dudley, who is considered a member of the dovish set among FOMC members, expressed his hope that the U.S. economy had reached a turning point, hopefully leading to more substantial improvement in labor market conditions. Such thinking among FOMC doves was not evident in previous FOMC discussions. However, Dudley’s words did not convince markets of an imminent taper, as the USD traded mixed to lower against most major currencies.
Most of the weekly drama revolving the Euro was rumor-based. Rumors started surfacing on Wednesday and suggested that the ECB is considering a lower of deposit rates from what currently is zero to a negative -0.1%. The ECB did not confirm any of it, yet the rumor sufficed to see the EUR/USD immediately losing close to a cent. The rest of the day saw the release of the Fed’s October minutes. However, it is advocating the idea that advances in the job market would lead to tapering was already priced in the markets as those saw little change.
On Thursday, the EUR/USD has retracted from the previous day’s drop, as ECB President Mario Draghi attempted to slow down the rumor mill. At a speech in Berlin, when explaining what led the ECB to cut its main policy rates two weeks before, Draghi asked that the audience will not try to infer from his words on the possibility of negative rates on the deposit facility. Draghi added: “As I said in the press conference this was discussed in the last monetary policy meeting, and there are no news since then… because people tend to put things together and create their own dreams". 

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Economic events of the week

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Monday: The Rightmove House Prices data will shed light on the U.K. real estate sector, amid growing concerns regarding the developing housing price bubble. Tuesday: ZEW Surveys will be published in Germany, revealing financial market experts’ view on the local economy. Wednesday: The Fed and the BoE are releasing their Minutes report. Japanese Trade Balance data will be published, current analyst expectations are for a slight improvement to a -851 billion Yens trade deficit. This will be followed by the Japanese All Industry Activity Index, which analysts predict to slightly improve. U.S. Mortgage Applications data will also be published, after growing mortgage rates set October’s applications to a monthly -1.8% decrease. Advance Retail Sales are due, as well as the Consumer Price Index, which is analyst surveyed to present no monthly change. Unemployment data will be published in Russia, which continued to present a strong economy with only a 5.3% datum last month. Thursday: The day will reveal expectations for future economic recovery for the Eurozone, as Purchasing Managers’ Indices will be published in France, Germany, and the Eurozone’s aggregate. U.S. Jobless claims will make their weekly appearance, and the Bank of Japan will publish its target rate. Friday: GDP data and the IFO surveys will be published in Germany. ECB’s Draghi will speak in Frankfurt and the Eurogroup will hold a meeting. Register at ANYOPTION and start trading TODAY!

Global perspective

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The world slowly continues its exit from the great recession. However, the global zero rate policies shave their mark in too many financial figures. Japan published a rather impressive Current Account Balance on Monday, presenting an increase to ¥ 587.3 billion. This seems to be the result of an increase at the value of Japanese foreign investment’s income rather than an actual increase of export value. Later that day, China published its Money Supply statistics, indicating a 14.3% annual increase, not highly unusual given the 7.8% GDP increase presented last month.

Unlike monetary data, which are quite volatile nowadays due to the globally low interest rates, tangible indicators appeared much more moderate. The Italian Industrial Production index presented only a 0.2% monthly increase on Monday. A monthly decrease of the same magnitude was presented on Tuesday at the Japanese Tertiary Industry Index of September.

Tuesday also revealed mild price increases throughout the Eurozone. Germany’s CPI presented an annual 1.2% increase. A muted 0.8% increase was recorded in Italy. The U.K., with its relatively upbeat growth compared to the rest of the Eurozone, presented a 2.2% annual increase. Spanish CPI, on the other hand, presented a -0.1% annual decrease on Wednesday.

On Thursday, Japanese GDP presented a 0.5% seasonally adjusted quarterly increase, higher than that of Germany which had only a 0.3% increase, and both were higher than the Eurozone’s 0.1% quarterly increase. U.S. Initial Jobless Claims continued their slow recovery as 339K claims were submitted during the previous week.
The week concluded with the Eurozone’s aggregated price index recording a 0.7% annual increase, and U.S. Industrial Production recording a monthly -0.1% decrease. 

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Yellen’s market confirmation

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Professor Janet Yellen testified before the Senate on Thursday, after being nominated the next head of the Fed. Yellen, 67, provided markets with an impressive presentation, in spite of difficult questions hammered by senators from all sides of the political arena. Yellen reaffirmed her reputation as a dovish Governor. When asked by Senator Tim Johnson about the Future of the Quantitative Easing amid slowly recovering job markets, her response was that she “would be strongly committed to working with the Federal Open Market Committee to continue promoting robust economic recovery”. Yellen continued stressing this dovish line when she later commented that it is “important not to remove the support when the recovery remains fragile”. Yellen’s words contributed a positive tone at equity markets, however, unlike the optimism we are used to from Bernanke’s comments in the past, markets seem to grasp that QE cannot last indefinitely. In addition to volatile increases throughout the testimony, the S&P 500 index saw an approximate 1.2% increase throughout the trading day. A more moderate tone was recorded at the Dow index, which gained only a 0.3% over the previous day and the NASDAQ composite index, which recorded only about a 0.2% increase. Yellen also said that the quantitative easing could not go on forever, as it created “potential risks for financial stability”. With an annual Consumer Price Index increase of 1.2%, it is unclear what could stop the fed from printing more cash and infusing that into the economy. As the Fed’s purchases already contributed to the 36% U.S. Monetary Base growth throughout the year, it would be difficult for Yellen to fend off critics arguing that inflation would pick up when interest rates finally return to pre-crisis levels. Register at ANYOPTION and start trading TODAY!

Economic events of this week

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Monday: Japan’s Balance of Payment Current Account Balance will be published. Industrial Production is due to be released in Italy, with analyst expectations for a Seasonally Adjusted Month over Month 0.2% increase, following two negative figures. 

Tuesday: The M2 Money Stock Index will be released in Japan, in addition to the Tertiary Industry Index. October’s Producer and Consumer Price Indices will see light in the U.K.

Wednesday: Jobless Claims and the ILO Unemployment rate will be released in the U.K. MBA Mortgage Applications will be published in the U.S., in hopes of recovering from the -7.0% decrease of last week.

Thursday: The Preliminary figure for Japan’s Q3 GDP is due, as well as September’s Industrial Production. France, Germany, Italy, and the Eurozone Aggregate will also follow with their Q3 GDP figures, while the latter is still surveyed to present an annually shrinking economy at a rate of -0.3%. Russia is due to publish its Gold and Forex Reserve. In the U.S., Initial Jobless Claims and the U.S.’s Trade Balance will be published. Fed’s Governor Bernanke is scheduled to speak.

Friday: The Eurozone’s Consumer Price Index will be published. In the U.S., the Empire Manufacturing Survey and Industrial Production will see light. 

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French socialist revolution faces hardships

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It has been a year and a half since François Hollande was elected president in France. Upon entering his position, Hollande made a rather brave set of economic reforms, as he favored the increase of income tax over the prior plan to increase Value Added Tax. However, the decreased incentive to conduct business in the country had its toll on the country's bottom line. Half a year later, Hollande was forced to increase VAT, while providing corporations with tax benefits.

Last week marked a new low for the French socialist revolution, as rating agency Standard & Poor's announced cutting France's sovereign credit rating to "AA". S&P's announcement criticized Hollande's Government for incompetence of reducing its spending and supporting economic growth. Specifically, S&P called France's "fiscal stability" constrained by too high tax levels on one hand, and inflated Government expenditure on the other hand, which S&P believes to be out of control.

Adding insult to injury, France's Industrial Production output was published on Friday, revealing only a -0.5% Month over Month decrease in September, in addition to a worsening trade deficit. Pierre Moscovici, the French finance minister, commented in a statement that he regrets what he referred to as S&P's “critical and inaccurate judgment", while adding that “Never has a government carried out so many reforms in such a short time and in such a difficult economic environment”. Moscovici concluded that in spite of the rating cut, France's rating remains high compared to other world nations. Markets apparently shared the same view with as Moscovici, as France’s sovereign bonds continue trading at roughly the same prices throughout the day. 

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Pessimism, responsible monetarism & other spinoffs

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Last week kicked off with Fed Governor Jim Bullard trying to fan rising concerns about the Fed's Treasury holdings of the U.S. Government debt being too big. Bullard said that he does not want to support "fiscal recklessness", and that the Fed's holdings of debt (relatively to the U.S. Gross Domestic Product), is no larger than it was in historical periods. Bullard added: "We are going to target inflation and be held accountable for it", implying that the Fed will not let its money printing push prices upwards beyond control. 

In China, however, there were concerns of a possible inflation. Chinese Premier Li Keqiang noted in a speech recently that "our outstanding M2 money supply has at the end of March exceeded 100 trillion Yuan, and that is already twice the size of our Gross Domestic Product… there is already a lot of money in the 'pool'; to print more money may lead to inflation".

Meanwhile in Europe, the European Commission grew a tad pessimistic over exiting the recession. On Tuesday, the Commission cut the Eurozone's 2014 growth prospects from 1.2% to 1.1%. This growing pessimism must have had a significant effect on the European Central Bank, as two days later it decided to join the monetary party by announcing a 25 basis points cut of its main refinancing rate to 0.25%. Needless to mention, the effect on the EUR/USD was quite massive.

Now with global rates set ultra-low and equity markets past impressive gains, vacant capital naturally seeks new lucrative investment ventures. One of these seems to have been Bitcoin, as the crypto currency surged to an all-time high and passed the $300 mark on Thursday. Other capital rushed to the very successful Initial Public Offering of the popular Twitter microblogging service, on the same day. 

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Twitter’s IPO goes live in the USA this Wednesday, Normal Trading starts tomorrow, Thursday 7th, 2013

The San Francisco social media company has raised its debut price per share from an initial $17 to $20 to between $23 and $25.

The increase doesn't come as a big surprise. Many observers considered the previous pricing to be relatively conservative, given that Twitter's market value was appraised at $20.62 per share in an assessment done by Duff & Phelps Corp. in early August. Twitter's earlier decision to begin the IPO pricing below its recently appraised value was seen as a way to contain expectations while leaving room to raise the target and build more buzz about its stock market debut planned for later this week.

Inside Twitter Headquarters in San Francisco

With this, Twitter intends to raise between $1.6 billion and $1.8 billion when its stocks starts trading on Thursday.

The number of shares the company intends to sell is 70 million. At the new price, the company will be valued at between $12.8 billion to $13.9 billion.

Twitter co-founder Evan Williams is the company's largest individual shareholder with a 10.4% stake, which would be worth between $1.3 billion to $1.4 billion. CEO Dick Costolo's stake would be worth as much as $191.9 million.

The second largest individual shareholder is Peter Fenton -- a Twitter board director and an early investor in the company -- whose stake would be worth as much as $789 million.

Twitter's IPO is being underwritten by Goldman Sach (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500) and is expected to be priced on Wednesday.

Regular investors will get their first chance to buy Twitter the day after, when shares will begin trading on the New York Stock Exchange under the ticker "TWTR."

Meanwhile the company disclosed that International Business Machines Corp. (IBM) sent a letter  alleging that they infringed on at least three U.S. patents held by IBM. The patents relate to a networking technique based on common contacts, a way to show advertisements without interfering with an interactive site, and using interconnected computers to reduce Web traffic.

Well, just log in to your favourite trading platform and start trading. 

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