Weekly Financial Markets Outlook
Previous Week Summary
It was a week busy with news that had high market-moving potential. It left stock markets in the U.S. almost flat until a good U.S. jobs report on Friday. The latter boosted equity indices higher. The U.S. added 128,000 jobs last month, better than the expectations for 90,000 despite the General Motors strike. A new Brexit extension keeps the GBP on the line with more concerns for traders and investors.
The Labor Department also upwardly revised its estimations of employment growth in August and September. For the week, the Dow rose 1.44%, the S&P 500 climbed 1.47%, and the Nasdaq rose 1.74%.
The Fed cut its benchmark rate on Wednesday a quarter-point for the third straight meeting to a range of 1.5%-1.75%. Fed Chief, Jerome Powell, made it clear that rate hikes won’t happen until there’s an inflation increase. In other words, the days of proactive rate hikes are pretty much over.
European financial markets showed mixed results the past week. U.K. equity indices were among the weakest performers. In spite of the European Union granting a Brexit extension until January 31, 2020, low performance was registered. This removed the threat of a no-deal Brexit during the previous week. The fate of Brexit now seems to rest on the outcome of a U.K. general election set for December 12.
GDP growth in the European Union was better than expectations. This gave a boost to stocks in France and Italy in particular.
The Week Ahead
This week, investors will hear from the Fed officials. The central bank indicated last week that further policy easing won’t happen after its third rate cut this year. Officials are waiting on a significant inflation increase to take place for future actions.
It’s a light week for U.S. markets, but investors have plenty of trading opportunities.
Tuesday will open with Australia’s interest rate decision. Traders will have the chance to take advantage of the volatility in AUD against other major currencies during the announcement.
Better News for the GBP?
In the U.K., composite PMI data will be out. This composite Purchasing Managers’ Index measures the activity level of purchasing managers in both the Manufacturing and Services sectors. A higher than estimated is generally positive for the GBP by the investors.
In the U.S, non-manufacturing purchasing managers index data will be out. A reading above 50 per cent indicates the non-manufacturing sector economy is in expansion and is positive for the USD.
On Wednesday, crude oil inventories data will be public in the U.S. Commodities investors will have an opportunity to take advantage of the expected volatility in Oil prices during the announcement.
Bank of England will release its interest rate decision on Thursday along with the inflation report. High volatility might impact the GBP currency pairs during the announcement time.