Financial Markets Outlook
On the U.S. financial markets, the S&P 500 gained in all sectors as hopes rose that the Fed’s first rate cut in more than a decade would rescue the economy from the effects of the trade war with China. Investors also were optimistic on news that U.S. President Donald Trump and China’s President would meet at the G20 summit in Japan at the end of this month. After the U.S. Federal Reserve (the Fed) strongly hinted that interest rates would be cut at its next meeting in July, the S&P 500 index rose by 2.3% to reach a new all-time high. Commodities also had a strong week, as the heightened tensions in the Persian Gulf pushed oil prices 11% higher only last week. Gold climbed to a near six-year high level. The dollar fell by 1.3% against a basket of currencies, its most significant weekly drop since 2018.
On the European markets, European Central Bank President Mario Draghi said additional stimulus, perhaps in the form of interest rate cuts, may be needed if the economic outlook doesn’t improve. That prospect looked very realistic after Germany’s ZEW survey of investors’ economic confidence worsened dramatically. The Bank of England also warned of the rising risk of a no-deal Brexit. Central Bank’s hints about rate cuts had a positive effect on European stock indices, as French CAC 40 finished the week with almost a 3% weekly rise and German Dax with nearly 2% weekly increase.
The Week Ahead
Investors will continue watching the growing tensions between the U.S. and Iran carefully as oil could continue being highly volatile.
The week will begin on Monday with The German Ifo Business Climate Index rates that measures expectations for the next six months, and a positive reading should be a good sign for the German major stock indices.
On Tuesday, U.S. C.B. consumer confidence data and new home sales data will be published. Better than expected results could be a positive outlook for investors.
On Wednesday crude oil inventories data will be released in U.S. A higher than expected reading could harm crude oil prices in the short run.
On Thursday GDP data in the U.S. will be released. Better than expected results could have a positive effect on USD against other major currencies. Investors should watch the volatility in U.S. major stock indices during the announcement time as well.
Later on Thursday, pending home sales data is going to be released and the Dow Jones industrial index is in focus.
The trading week will close with GDP data in the U.K., and better than expected data could have a positive effect on the GBP against other currencies. Later that day, E.U.’s CPI data will be released, and higher than expected reading could have a bullish effect on the EUR.
Another busy week is ahead of us on the financial arena, with many major economic announcements to look for. Investors will focus on the continuing tensions in the Middle East and the local economic data releases in the U.S. and Europe to set the financial market’s direction.