Financial Markets Outlook

Posted by SM-INVEST -

During the previous trading week, financial markets were under the strong influence of the central bank announcements. Hopes for the Fed’s first rate cut in over ten years have diminished late last week by the robust employment report, causing stocks to start lower this week. Fed’s chairman Jerome Powell’s statement at the House of Representatives indicated that the central bank was still intending to cut interest rates later this month. The anticipation of lower rates predictably weakened the U.S. dollar and fueled prices of gold and oil. Oil finished the week with almost 5% increase, while all major U.S indices set new all-time highs once again.

The European markets felt the negative influence of the U.S. – China Trade war outcome. The ECB confirmation of the possibility for an interest rate cut soon didn’t have enough power to stimulate the European equities that finished the week on the negative side.

The Week Ahead for the Financial Markets

There is a big earnings week ahead of us, as the largest banks are starting to publish their quarterly earnings reports. On Tuesday, investors’ eyes will be waiting for Citigroup, JPMorgan Chase, Goldman Sachs and Wells Fargo to report and give investors an indication on the financial strength of the investment banking sector. The earnings flood continues with Bank of America reporting on Wednesday and Morgan Stanley to release data on Thursday. Furthermore, two of the U.S. important railroads companies are publishing their reports on Thursday (Union Pacific Corp), and Friday (Kansas City Southern) will attract more interest as investors are looking for signs of how deeply U.S. President Donald Trump’s multi-front trade war is affecting freight companies and the broader economy.

From Tuesday onwards, important economic data will be out, starting with Australia’s NAB business confidence for June. Markets to watch during the announcement will include AUD against other major currencies. Next in line is the German ZEW Economic Sentiment and higher than expected reading might negatively impact the EUR. In the U.S., retail sales data for June will come out. This is an important indicator of consumer spending and is a significant indicator of the U.S. economy. Higher than expected figures, should be a positive sign for the USD and for the U.S equity indices as well.

Wednesday will begin with a release of June CPI data in the U.K. and European Union. Better than expected readings are considered to be positive indicators for GBP and EUR. Later that day, crude oil inventories data are out in the U.S. as previous week’s data had a significant effect on oil prices because of the substantial decline in the inventories.

What to Expect Toward the End of the Trading Week?

On Thursday, Employment Change in Australia data will be released and better than expected is expected to have a positive impact on the AUD against other major currencies.

On Thursday, Employment Change in Australia data comes out and positive numbers might have a good impact on the AUD.

U.K. retail sales are out later that day, and positive data might have a good effect on the GBP.

Leading companies will start releasing their quarterly reports this week, and this can add a lot of interest and trading opportunities for investors.

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