Asian markets got off to a slow start with thin volumes last week as many countries’ markets remained closed on Monday in celebration of the Lunar New Year holiday. Markets began coming back online Tuesday, and by Thursday investors all across the region were back at work. In many ways it was a choppy week, with markets rising one day, only to drop the next; but they did end the week on a high note, with broad gains on Friday. Mainland China’s Shanghai Composite was the best performer, even though it only traded for two days. In those two days it rose 2.8% as Chinese investors were ready to begin buying following the holiday. Australia’s S&P/ASX 200 also performed well, gaining 1.6%, while the Kospi was 1.3% higher. Continuing Yen strength pressured the Nikkei, but it did manage a 0.8% weekly gain, while Hong Kong’s Hang Seng underperformed as it was only up modestly by 0.5%.
The coming week will likely continue to see the Nikkei in Japan struggle due to Yen strength. Mainland China will release PMI data mid-week, which could make or break markets there and to some extent in Hong Kong. Australia has seen a recovery on corporate earnings in the past week, and that could continue; but mining shares could weigh on market performance if commodities come under pressure. South Korea’s Kospi had a choppy week last week and needs to find direction in the coming week, or it could end up headed lower.
European markets struggled for much of the week, but finished with modest gains for the most part. With U.S. markets showing weakness from the start of the week, European markets caught the pessimistic mood as well. At the end of the week the Stoxx Europe 600 had a small gain of 0.2%, and Germany’s DAX wasn’t much better with a 0.3% rise. The French CAC 40 outperformed for the week, gaining 0.7% as it strung together four consecutive winning sessions. In London the FTSE fell for four out of the five sessions and was one of the only major indices to post a loss as it fell 0.7% for the week.
The coming week is likely to be much of the same, with European markets taking their cues from Wall Street. It could end up being a very good week, though, as worries over rates rising too much in the U.S. have receded and the U.S. dollar is strengthening; and if CPI and PMI data don’t come in too hot it will set up a perfect scenario for equities to rise. Coming off the tepid week they had this past week, investors could be quite happy to push prices up.
U.S. markets had a holiday shortened week, and struggled when investors returned to the markets, as worries over inflation heating up and rising bond yields continued sending capital out of equities. Things turned around late Thursday after the Federal Reserve released their semi-annual monetary policy report, which highlighted the strength of the U.S. economy, and forecast that inflation would remain around the 2% level, keeping interest rate hikes to a minimum in 2018. Friday made up for losses the rest of the week and the S&P 500 finished with a 0.6% weekly gain, while the Dow was 0.4% higher on a weekly basis, and the Nasdaq outperformed as it advanced 1.4% for the week. The Nasdaq is now just 2% below its January highs, so we could see new records being set in U.S. equity markets this coming week.
Speaking of the coming week, we should see U.S. markets get off to a strong start, building on the Friday rally as there not much in the way of economic data or earnings reports to derail markets. Tuesday and Wednesday will likely begin with caution as investors wait to hear what the new Federal Reserve chairman Jerome Powell has to say when he testifies in Congress. No surprises are expected from the normally cautious chairman, and he will almost certainly stick to the same monetary policy script that we’ve become accustomed to with Janet Yellen.
Precious metals struggled this past week as the U.S. dollar staged a recovery that pressured gold especially, but also silver to a lesser extent. After suffering its worst one day loss in 14 months early in the week, gold failed to recover and ended the week with a loss of 2.2%, which was its worst weekly loss so far this year. Silver was somewhat better, losing 1.6%. Crude started the week with strength, paused mid-week as traders awaited the latest U.S. inventory and production figures, and then closed out the week with a bang after U.S. inventories unexpectedly dropped. U.S. WTI crude futures gained 3.3% for the week, while Brent crude, the global benchmark, was 3.8% higher for the week.
The same trends should remain in place in the coming week, with gold under pressure from a rising U.S. dollar and rising bond yields. Silver, which is historically more volatile than gold, could see steeper losses in the coming week. Crude is expected to continue moving higher as inventory data was positive, and the oil sector is moving into their maintenance period, with refinery production dropping off.
|14:00||EUR||ECB President Draghi Speaks|
|15:00||USD||New Home Sales|
|18:00||GBP||MPC Member Cunliffe Speaks|
|All Day||EUR||German Prelim CPI m/m|
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|09:00||EUR||M3 Money Supply y/y|
|13:30||USD||Core Durable Goods Orders m/m|
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|21:00||CAD||Annual Budget Release|
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|08:00||CHF||KOF Economic Barometer|
|09:00||CHF||Credit Suisse Economic Expectations|
|10:00||EUR||CPI Flash Estimate y/y|
|10:00||EUR||Core CPI Flash Estimate y/y|
|13:30||USD||Fed Chair Powell Testifies|
|13:30||USD||Prelim GDP q/q|
|15:00||USD||Pending Home Sales m/m|
|15:30||USD||Crude Oil Inventories|
|00:30||AUD||Private Capital Expenditure q/q|
|01:45||CNY||Caixin Manufacturing PMI|
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|23:30||JPY||Household Spending y/y|
|07:00||EUR||German Retail Sales m/m|
|08:00||EUR||Spanish Unemployment Change|
|Tentative||GBP||Prime Minister May Speaks|
|15:00||USD||Revised UoM Consumer Sentiment|