Weekly Financial Markets Outlook
Trade War Continues
U.S. stocks closed at fresh new highs on Friday amid the trade war uncertainty. There are revived hopes for a U.S. – China trade deal and with more positive economic data going public. The White House said trade negotiations with China saw some progress. The S&P 500, was up by 0.77% on Friday and the index finished higher for the sixth consecutive week. The Nasdaq Composite Index gained around 0.7% on Friday to finish higher for the seventh straight week. For the year, the S&P 500 is up 24.5%, and the Nasdaq is up 28.7%. The market spent much of this year recovering from the 2018 fourth-quarter drop. Additionally, it might feature the most significant single-year rise since 2013.
What was driving the markets this week? Equities markets have posted gains as investors remain positive regarding developments in the U.S.-China trade war and hope that they will soon justify recent record-highs for the major stock indexes. A downside on the economy was that industrial production fell by 0.8%, a third consecutive monthly decline. Most economists consider that a consequence of the trade fight between the U.S. and China.
European equity markets had a mixed week when the French CAC index finished the week with a 0.84% increase. FTSE 100 index finished with a 0.77% weekly drop, as the Brexit fears continue bringing uncertainty for the U.K.’s markets.
The Week Ahead on Financial Markets
What should investors be watching for the upcoming trading week?
Developments in U.S. – Chinese trade talks will continue to be the leading market’s driver. Additionally, global PMI data will be the target for any new signs of the trade war aftermath. This week many major retailers will report their earning. Among them are Home Depot, Target and Gap which will signal the end of the third-quarter earnings season.
On Tuesday, U.S. building permits will be out. This could indicate the change in the number of new building permits issued by the government. Building permits are a key indicator that shows demands in the housing market. Higher than expected results are generally positive for the USD and for the major U.S. equity indices.
Crude oil inventories data will be public on Wednesday. This could give investors an idea about the latest demands for crude oil. If the increase in the inventories amounts is less than expectations, it implies higher demand which is positive for crude oil prices.
Closing the Trading Week
Later on Wednesday, The Federal Open Market Committee will publish its records about the meeting two weeks ago. This could shed some light on their decision to cut interest rates last month. Currency traders observe these records to get clues for the future interest rate decisions. High volatility in USD might shake the currency during the announcement.
On Thursday, October U.S. existing home sales data will be out. This highlights the number of residential buildings sold during the previous month as an indicator of the overall economic strength. Higher than expected data is generally positive for the USD and for the U.S. major equity indices.
On Friday, German GDP data will be public. This could give investors an understanding of economic activity and an indication of financial health. Better than expected numbers are a positive indicator for the EUR. Also, German manufacturing PMI data will be released. Investors expect these surveys as purchasing managers usually have early access to company performance, which can be a leading indicator of general economic performance. Better than expected reading is a positive sign for the EUR and German major equity indices. Later that day, manufacturing and services PMI data will be published in the U.K. This could give investors better indicators of the performance of both sectors of the economy.