Economic events of this week

Join Anyoption and take advantage of the volatility of the markets ..Start Trading TODAY! Monday: Preliminary estimates on Japan’s Industrial production data are due and analysts expect an annual increase of 1.5%. In the Eurozone, M3 Money Supply data will be published. The U.K. will gain a glimpse of housing-price-fuelling Mortgage Approvals. Preliminary figures of June’s Consumer Price Indices throughout the Eurozone. Indications will be dispersed regarding the U.S. supply side, with the release of the MNI Chicago Business Barometer. Also due in the U.S., May’s Pending Home Sales and Dallas Fed Manufacturing outlook. Tuesday: The Tankan Business Conditions forecast will be released in Japan. China will see the release of the official and the HSBC’s, manufacturing Purchasing Managers’ Indices. The Markit Manufacturing Purchasing Managers’ Indices will be published in Spain, Italy, France and the U.K alongside the Eurozone aggregate figure. Additionally, labor market data will be released in Germany, in addition to aggregated Eurozone figures. In the U.S., final estimates of June’s Purchasing Managers’ Index will be published, as well as ISM Manufacturing data. Wednesday: Japan will publish data on its monetary base, recently indicating the number of Yens circulating in the economy to increase by an annual 45.6%. In the U.K., Nationwide House Prices data will be published. Labor market data will be published in Spain, analysts expect to see a 155K decrease in the number of Unemployed. In the U.S., the weekly MBA Mortgage Applications Index will be published, as well as June’s ADP Employment Change and May’s Factory Orders. Thursday: The day will kick off with a plethora of Purchasing Managers’ Indices for the service sectors from the Eurozone. The ECB is scheduled to announce interest rates. Analysts, however, expect no change of these, following the previous month’s drop of rates. In the U.S., May’s Trade Balance data will be published, following by June’s Change in Nonfarm Payrolls. Also due is June’s Unemployment rate, currently at 6.3%, as well as the weekly Initial Jobless Claims. Friday: In Germany, May’s Factory Orders data will be published, recently presenting a 6.3% annual increase. Join Anyoption and take advantage of the volatility of the markets ..Start Trading TODAY!

Abenomics is not going as planned

Last week presented a good opportunity to review the implications of Japanese Prime Minister Shinzō Abe's ultra-expansionary monetary policies. On Monday, the Nation's Central Bank Governor, Kuroda, addressed Japan's Association of Corporate Executives, noting that Japanese inflation currently sits at 1.5%, when adjusting for price increases stemming from April's consumption tax hike. Kuroda expressed hope that rising inflation would push individuals towards higher expenditure levels as he stressed that "we need to achieve a world in which people engage in economic activities based on the assumption that two percent inflation is a given". 

When the Nation’s Consumer Price Index was released the following Thursday, it indicated that Japan’s Annual inflation has increased by a noteworthy 0.3% over the previous month’s print. Sadly, inflation’s closing in on Kuroda’s target did not seem to encourage Japanese consumer sentiment. Alongside with the publishing of the CPI, May’s Household Spending presented an 8% annual contraction, versus merely 4.6% in April. 

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Glum U.S. GDP data

When the advance estimate for the growth of the U.S. economy was published on April 30th, it presented a mild 0.1% annualized increase. That was a negative surprise in an economy hoping to see some recovery. The second estimate of the same figure, which was published a month later, was considerably worse as it suggested the U.S. economy was contracting by an annualized 1%. The first contraction in 12 quarters was not the end of it. Last Wednesday, when the third estimate was published, it indicated a contraction of 2.9% at the nation’s product, the worst figure in five years. Breaking down the negative change at the headline figure reveals that most of it was due to a drop in the personal consumption as that receded from a 3.1% annualized increase in the second estimate, to just 1% in last week’s data.

Preliminary estimations argued that weak consumer spending in the U.S. during the quarter was the result of adverse weather conditions, encouraging hope for a recovery in the following quarter. However, that was countered by the fact that most of the downward revision of consumption was listed in nondurable rather than durable goods, which does not need to be re-stocked. 

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Economic events of the coming week

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Monday: Preliminary figures on June’s Markit Purchasing Managers’ Index will be released in Japan, throughout the Eurozone and in the U.S. The HSBC Manufacturing Purchasing Managers’ Index will be released in China. May’s Existing Home Sales are due in the U.S., where analysts expect a noteworthy increase to 4.73 million dwellings sold, versus 4.65 million in April. Tuesday: The IFO Survey will be published in Germany. In the U.S. demand side, the Consumer Confidence Index and May’s New Home Sales data will be released. On the supply side, the Richmond Fed Manufacturing Index will see light. Wednesday: June’s Manufacturing Confidence Index will be released in France. Italy’s Consumer Confidence Index will be released. Surging in recent months, the index levels are similar to those on the eve of the great recession. In the U.S. are the weekly MBA Mortgage Applications is expected, May’s Durable Goods Orders and the Q1 National Account’s third estimate. Thursday: The French Consumer Confidence Index is due to be published, recently not as solid as that of Italy's, however. The bank of England’s Carney is due to speak in London on the central bank’s financial stability report. The weekly Initial Jobless Claims will see light in the U.S., in addition to Personal Income and Spending. Friday: May’s Jobless Rate will be published in Japan, in addition to the Job-To-Applicant Ratio and various Consumer Price Indices. Preliminary figures on Spain’s Consumer Price Index will be released. Also due are the Eurozone’s Consumer Confidence Index, German Consumer Price Index and the University of Michigan’s Consumer Confidence Index. Join Anyoption and take advantage of the volatility of the markets ..Start Trading TODAY!

Maybe it is the economy that is unclear

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The press conference's Q&A enabled reporters to tackle Yellen on the matter. When confronted with the fact that market pricing for interest rate is lower than the consensus of Fed members, Yellen said that each Fed member has a "considerable band of uncertainty" around his forecast. When questioned by what extent is the monetary policy driven by financial stability, Yellen said that she does not see stability as an important factor in shaping monetary policy at the moment. Reporters kept pushing the inflated asset bubble premise, as they suggested that the S&P 500 is at a record high. Yellen replied that she “does not see valuations outside of historical norms for equity prices broadly". Ultimately, Yellen was asked if there would be a considerable period between the end of the bond purchases and the first hike of the federal funds rate and specifically, whether March's six-month assessment is still good. To this, Yellen concluded with an undeceive response that there is "no mechanical formula whatsoever for what a considerable time means".

Evidently, the perception that everything is relative seems to be very valid in financial markets nowadays. It is easy to see why an additional 10 billion dollars tapering can be a step backwards. 

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Stocks gain on Fed’s lack of clarity

Last Thursday’s Federal Open Market Committee (FOMC) rate decision seemed to be good on U.S. equity markets and asset markets in General. The NASDAQ Composite Index added 0.7% to its value following the announcement and the Dow Jones added 0.6%. This is somewhat surprising given the announcement of an expected, yet non-trivial, 10 billion dollars reduction of the Fed’s asset purchase program. Further digging into press release accompanying the decision, one would note that the Fed is quite content with growth in economic activity, saying it had rebounded in recent months, and that business fixed investment, which is considered pro-cyclical, has resumed its advance. So one has to wonder, if the economic data is suggesting a more hawkish monetary policy, why are equity markets gaining? QE3's tapering had been quite consistent since it started in December of 2013. In that sense, last week's 10 billion addition was not a surprise. That leaves us with the future path of the Federal funds rate. Regarding this, there is the fact that the announcement saw the Fed’s longer term rate projection sliced from 4% to 3.75%. Regarding rate expectations, last week's announcement had very dull content. Investors could have been concerned of Yellen following BoE Governor Carney’s path, by suggesting that a rate hike could occur sooner than markets currently price. Additionally, Yellen's comment from March, that the gap between the end of QE3 and the Fed raising rates should amount to about six months, was still her most recent guidance. Regarding financial stability, the recent month's rally in equity markets, amid historically high valuations, is another reason to question the current monetary policy. Join Anyoption and take advantage of the volatility of the markets ..Start Trading TODAY!

Economic events of this week

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Monday: The Final estimate of the Eurozone’s Consumer Price Index will be released. Analysts expect for it to remain at a moderate annual 0.5%. In the U.S., the Empire Manufacturing survey and May’s Industrial Production data will be released. Tuesday: May’s Consumer and Producer Price Indices are scheduled for release in the U.K. The ZEW survey will be released in Germany. In the U.S., May’s Consumer Price Index, as well as Housing Starts and Building Permits data will be published. Wednesday: Japan will publish May’s Trade Balance data, where analyst consensus sees the deficit widening to over a trillion Yen. The U.S. is due to host the weekly MBA Mortgage Applications. The day will also see the all-important FOMC rate decision published – analysts expect the FOMC to order QE3 tapered by another 10 billion dollars, setting it at a monthly 35 billion. Thursday: April’s All Industry Activity Index will be published in Japan. May’s Retail Sales data will be released in the U.K. In the U.S., both the weekly Initial Jobless Claims, as well as May’s Leading Index will be published. Friday: Advance figures of June’s Consumer Confidence will be released in the Eurozone.

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