Weekly Financial Markets Outlook

Posted by SM-INVEST -
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Previous Week Summary

The week in Europe started with the continuing uncertainty around Brexit. British politicians continue debating whether to leave without a deal, exit with a deal or ask for another extension. Financial markets might feel the effect of Brexit unpredictability.

U.S. stocks rose for the third straight week, closing near record highs. The weekly jobless claims unexpectedly fell last week, pointing to a stable labor market. More evidence of a slowdown in the manufacturing sector was in the durable goods orders report. This showed a decline of 1.1% in September. It was a busy week for corporate earnings. Companies such as Procter & Gamble, Microsoft and Tesla reported stronger than expected third-quarter earnings. Twitter fell by 18% after a disappointing quarterly report. Consumer sentiment increased to 95.5 in October. This is up from September’s 93.2, giving another indication on the solid economic state.

Almost 40% of the S&P 500 companies have released third-quarter earnings with majority beating analysts’ estimates. The leading U.S. equity indices finished the week with positive sentiment when Dow Jones rose 0.7%. The S&P 500 Index had a 1.2% weekly rise and NASDAQ finished the week with a 1.9% weekly rise.

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The Week Ahead for the Financial Markets

On Tuesday, Consumer confidence data will be out in the U.S. As a leading indicator, it predicts consumer spending, which plays a significant role in overall economic activity. Higher reading should be positive for the USD. 

Wednesday will be a day of the major economic events for the financial markets. It will start with German unemployment change, which measures the change in unemployment numbers during the last month. Higher numbers than expected could be negative for the EUR and harmful for the major German equity indices.

Later on Wednesday, U.S. Gross Domestic Product (GDP) data will be out. This GDP data is the broadest measure of economic activity and the primary indicator of the economy’s health. Higher than expected numbers are usually positive for the USD. 

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Crude oil inventories data will be public on Wednesday as well. Commodity investors will follow whether the slowing growth in China will have any effect on U.S. oil inventories. If the increase in crude inventories does not meet the expectations, it implies stronger demand. This could be positive for crude oil prices.

The main event of the week for the traders and investors comes on Wednesday. That’s when the Federal Reserve Bank in the US announces its interest decision. Traders watch the changes in interest rates closely because short term interest rates are the primary factor in currency valuation. Before and after the announcement, volatility in USD is normal, and most traders are after it. 

Closing the Trading Week

Eurozone CPI (Consumer Price Index) will be out on Thursday. This index measures the change in the price of products and services from the consumer perspective. It also measures changes in purchasing trends and price changes. A higher than expected reading could be a positive indicator for the EUR.

Another primary indicator for the overall economic health will be out on Friday in the U.S. Traders will watch for the October’s Unemployment Rate. A higher than expected reading could be negative for the USD and other major equity indices.

This week the markets will continue watching the Brexit developments in the U.K. Also, the earnings’ season in U.S. and interest rate decision will provide many trading opportunities for the investors as well.

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