During the week, stocks showed mixed trends. volatility peaked on Thursday when the European Central Bank announced a decision on monetary policy. European regulator resets the key rate and QE program has expanded to 20 billion euros per month. And then the market took with optimism. But at a press conference following the decision, the head of the European Central Bank Mario Draghi stated that he sees no reason to further reduce interest rates at the current conditions that caused an impressive reduction. However, on Friday, stocks still have resumed growth. As a result, a week benchmarks complete “in the green“. The US Dow Jones and NASDAQ for the week were added, respectively, 1.29% and 0.81%. German DAX30 rose by 0.85%. Symbolic increase of 0.33% and Hong Kong demonstrated the HSI.
Demonstrated mixed dynamics and commodity assets. Brent crude oil noted the three-month high, rising to the level of 41.45 dollars per barrel.. Growth on the basis of working five days amounted to 3.54%. Gold (XAU / USD) on Friday reached a 13-month high of 1284.53, but by the end of the day lost all earned. Metals Week concluded with a total of 0.75%. However, weaker-than-expected data on China‘s economy, published on Saturday (industrial production and retail sales fell more than expected), it may return to concerns about the global economic outlook and again cause the asset growth of quotations. Silver (XAG / USD) closed with a symbolic loss of 0.1%.
The economic data of the last week:
- Monday. Germany: January industrial orders + 1.1% versus – 2.7% in December
- Tuesday. China: February, 32.59 billion vs. 51 billion balance of trade; exports fell by 25%, imports – by 13.8%
- Wednesday. The Reserve Bank of New Zealand cut interest rates by 25 bps up to 2.25%
- Thursday. The European Central Bank cut its key rate to 0% from 0.05%, the deposit rate to -0.4% from -0.3%, expanded QE program to € 80 billion per month against the 60 billion previously
- Friday. Canada February, the unemployment rate of 7.3% – higher than the forecast of 7.2%
Forecast for the week on March 14 – March 18
This week the key event will be the publication of the Fed‘s monetary policy. Although even before this will be published data on retail sales and reports on consumer price inflation, industrial production, as well as building permits issued, which will add clarity about the US economic outlook. It is not excluded that in anticipation of the Fed‘s press conference, these reports will be ignored. In general, the situation is relatively stable develops: the economy continues to create new jobs (242,000 in February against 190,000 projected), business activity in the industry index rose slightly to 49.5 (against 48.2 a month earlier), in services It is held in the growth zone.
But at the same time in the country recorded a slowdown in wage growth, which can act as a deterrent to inflation. Most likely, the Fed will not raise rates at this meeting – according to the rate of the futures positions with a probability of 96.1%, it will remain unchanged. Much will depend on the rhetoric. But here, perhaps, one should not expect aggressive comments. Yellen will try to be the rhetoric so as to leave room for maneuver. If the market will accept the statements of the Federal Reserve as insufficiently aggressive, stocks may continue to grow. Dow Jones (YM) can rise to the level of 17530. Nasdaq (NQ) target the movement to the level of 4480.00.
Commodity and raw market
Brent crude oil prices were fixed within the range of 38.00 – 41.45. To overcome its upper boundary can be difficult without additional catalysts. The fundamental backdrop has not changed radically. But at the same time, there were some doubts about the reality of the meeting of countries – members of OPEC with countries not members of the cartel, which was to be discussed freezing the volume of black gold. At the end of last week, there were rumors that it could not take place because Iran has not yet confirmed its participation in the transaction. Such fears, of course, are the deterrent growth of quotations. However, any information on this subject can cause a spike in volatility. In this case, if the meeting is confirmed yet, of Brent may try to overcome the mark of 41.45, aiming to increase the level of 43.00 dollars per barrel. It is possible that something will clear up on Monday, when the head of the Ministry of Energy will meet with the Minister of Oil of Iran.
In support of the black gold quotes advocates also the fact that the IEA notes the relatively high probability of passing the bottom of the oil quotations. Agency raised its forecast for global oil demand for 200 thousand barrels per day. And at the same time waiting for proposals fall by 750 thousand barrels per day, which exceeds the previously announced 100 thousand and that, in the absence of agreement on the meeting of the OPEC and non-OPEC may keep Brent from falling below the level of 38.00.
The coming week could be interesting enough for the foreign exchange market. Monetary policy decision to publish the Bank of Japan, the US Federal Reserve and the Bank of England. However, it is worth noting that probably none of the regulators will not make any changes in monetary policy. Nevertheless, the British pound can demonstrate short-term easing in response to the Bank of England‘s decision to keep the rate and volume of purchases at the same level of assets.
But, taking into account the fact that the British currency in recent times looks oversold, the fall can be a good point to enter long positions. Especially because the probability of the UK from the EU structure is quite low and it can keep the pair GBP / USD from a long fall. In addition, the relatively high probability that the Fed will not raise rates and accompanying statement will be pretty soft to keep the room for maneuver that the negative impact on the US dollar. The target of the growth may be the level of 1.4400.
Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.