Market Analysis

Weekly report (Archive)

Week 17/06/2013

Macroeconomic view:

     In Europe according to the data released from the Euro zone on Tuesday showed that employment fell to its lowest level in more than seven years. Eurostat, the European statistics agency announced that the number of people in work in the 17 countries that use the euro fell by 0.5% in the first quarter compared with the last three months of 2012. This was the largest quarterly decline since the second quarter of 2009. The fall leaves 145.1 million people in employment, which is the lowest rate since the fourth quarter of 2005. Eurostat has also confirmed that the figures for inflation with the CPI strengthened in May to 1.4% in the euro area from 1.2% in April. The rate still remains well below its medium-term objective of the ECB, which is slightly below 2. On Wednesday Industrial production grew 0.4% compared to March, while in relation to the April of 2012 fell 0.6%. As shown by the figures from Eurostat, the monthly increase in production was concentrated in Germany and France, the biggest Eurozone economies, as the countries most affected by the financial and banking crisis, such as Greece, Spain, Italy and Portugal, production fell. inflation edged higher in May in Germany, although it remained below the ECB target for price stability, as shown by the figures announced by the Federal Statistical Office. Inflation rose to 1.5% in May from 1.2% in April, confirming the initial estimates. But the statistical office revised downward harmonized inflation, which is monitored by the ECB. Based on harmonized conditions, consumer prices in Germany rose 1.6% yoy, lower than the previous estimate of 1.7%. The objective of the ECB is to keep inflation below, but close to, 2% over the medium term. On Thursday the World Bank announce that the global economy will run at a rate of 2.2% this year, instead of 2.4% as announced in last January's forecast and lower than the growth of 2.3% recorded in 2012. For the Eurozone as the World Bank expects the decline in GDP of 0.6% this year and this announcement led the markets down.

      In the USA an adaptation of the QE program does not mean the end, while it does not mean that the Fed is nearing a decision to raise short-term interest rates. Investors have begun to worry about the possibility of the Fed to start raising interest rates - which are close to zero - faster than they expected. Since last December the Fed constantly reiterates its commitment to keep short-term rates near zero until the unemployment rate declined to 6.5%, assuming that the inflation will not rise. At the same time, however, the concern of investors fueling the debate on reducing the quantitative easing program by the Fed that has been formed at 85 billion per month. On Thursday Dow Jones index increased after the biggest drop since the beginning of the year, with the help of positive news from the U.S. economy which succeed to return the negative climate about a sell-off in the Japanese stock market. Japanese Nikkei reached the region of bear market, as the index dropped 6.4% and the distance from the high of May is more than 20%. However, better than expected retail sales and new jobless claims in the U.S. were able to reverse the sentiment into positive. On an annual basis retail sales rose 4.3%. A drop recorded during the previous week on new applications for unemployment benefits in the U.S. In particular, according to data from the Ministry of Employment, new Jobless Claims dropped by 12,000 to 334,000 for the week until June 8.

      In Asia the Bank of Japan kept interest rates unchanged as well as the quantitative easing program, while it did not take any other action to face the extreme volatility in the markets.

     JPY was the strongest currency for the week between the majors and appreciated by 2.77% against USD and the pair USDJPY traded on Friday around 94.94. NZDUSD traded on Friday at 0.8070 and up by +2.44% for the week.

      On the Commodities markets Gold fell last week to $1379.10 and decreased by -0.28% as the resistance around $1.400 is still active and sellers appear every time the precious metal reaches this price level. On the energy market Crude Oil traded at $97.11 on Friday, up by +1.12% in a weekly and  basis with the most important test the resistance at $100.00.

      This week on Tuesday the Reserve Bank of Australia will release its minutes as well as the Bank of England its Inflation Report. In the USA Consumer Price Index is expected, and on Wednesday Fed will announce its Rate decision and FOMC its projections about the economic indicators. The Bank of England will also release its minutes and in the New Zealand Gross Domestic Product is expected to be announced with growth rate at +0.6%. The SNB Will announce its Rate decision on Thursday and on Friday the most important event for the week is the Consumer Price by the Bank of Canada.

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