Financial Markets Outlook

Posted by SM-INVEST -
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Previous week

During the last week of June, global stock exchanges traded in a very narrow range. Investors expected to see the result of the supposed meeting during the G-20 summit between the U.S. President Donald Trump and China’s President Xi Jinping. The outcome would have seen whether the trade war was going to escalate even more or towards a cool down.

In general, this June was the most successful month for the U.S. markets in decades. The Dow Jones Industrial Average had its best June gain of 7.2% since 1938. The S&P 500 index closed its best June return, with an increase of about 6.9%, since 1955. The June rally for equities has been supported by the Fed. The latter concluded its Wednesday rate-setting meeting by signalling a willingness to cut rates as early as the end of the July.

Commodities closed June on a positive note, as oil gained more than 9% in June. OPEC might extend its cut of oil production into the second half of this year. Gold had a very positive year as well smashing $1,400 price level and reaching its highest level since 2013.

European stock markets recorded a surge in German stocks’ value. This assisted European equities to finish its best first six month’s performance in 20 years. Major European STOXX index enjoyed its best first half-yearly gains since 1998 closing with a rise of 14.5%.

The Week Ahead on Financial Markets

Markets will open the third quarter in the holiday-shortened Fourth of July week, after one of the best first halves in more than 20 years for stocks. After the G-20′s trade headlines are behind, the focus will shift to what could be the biggest news of the week ahead — June employment report on Friday. The report could be an important sign on when and how much the Fed could start to cut interest rates, especially after last month’s disappointing data.

Monday trading will open with German unemployment data, which could cause increased volatility in major German indices and the EUR. Higher than expected reading might cause weakness of the EUR against other major currencies. Later that day, manufacturing PMI data is out in the U.K. and U.S. This could make it a trading opportunity for GBP and USD traders.

On Tuesday, The Reserve Bank of Australia will announce its interest rate decision, which could lead to high volatility in AUD against other currencies.

On Wednesday, major data is out in the U.S. before the 4th of July holidays. The ADP National Employment Report goes public, and this serves as a good predictor of government data, which is published 2 days afterwards. The change in this indicator can cause increased volatility. A better than expected data should be taken as positive for the USD against other currencies. Investors will also be waiting for crude oil inventories report, which will show whether the oil prices are on an ascending slope in short-term.

Closing the Trading Week

On Thursday, the retail sales report is out in Australia. Better than expected result should have a positive effect on AUD. This report could also have a significant impact on the volatility of major Australian market indices.

On Friday, nonfarm payrolls and the unemployment rate will be released. Higher than expected reading of the unemployment rate could harm major U.S indices and might cause weakness in USD.

A short business week is ahead of us, but still with many major economic data releases. The markets will probably wait for the official U.S. unemployment data release on Friday to have some more indicators for the direction of the FED future interest rate policy.

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