Amid economic and political pressures, markets looking for a positive push
This week saw more high volatility, a 300-point drop in the Dow Jones for a single day and the first positive week for the euro since the beginning of December.
Earnings season also saw its most active week with companies across all industries divulging data on their performance in the end of 2014. The most notable developments came from Google who missed estimates and worried some investors and traders, despite their ever present plans for diversification (internet in space being one of them).
Alibaba also had their first misstep by reporting lower earnings than most analysts predicted. With more time living as a public company and respectively in the spotlight of different analysts – probing and picking its past, present and future – this was always a possibility. Still, the long-term prospects look bright given the overall potential of online retail in Asia.
The euro finally caught a break after the downward spiral continued dragging it to 1.12 against the dollar. Traders are looking for signs if this is the bottom, or if it’s just a retracement (you can check out our video tutorial on trading retracements here), before continuing with the trend that started at around 1.40.
Additional pressure for the common currency has resurfaced with the most recent flare-up of the conflict in eastern Ukraine. Although the immediate impact is small (not so for the rouble which today climbed over 70 against the dollar) and dwarfed by the announcement of the ECB’s very own quantitative easing, it does however change the outlook of how relations will move forward.. or backwards with Russia.
Part of this geopolitical chess game are the conflicting signals from the new government in Greece on their personal relationship with Russia, fuelling more talk of a possible exit from the eurozone. This and the expected meetings that aim to restore a cease-fire in the Donbass region could affect the euro next week.
Next week’s key economic events will start again on Sunday, 1.2.15, when Chinese inflation data will set the tone for next day’s trading, with markets expecting more information on how the second largest economy is cooling off.
Monday 2.2.15 – Inflation data from Britain and the U.S. will follow in the afternoon, providing a glimpse into what is happening there and setting up the important announcements in Wednesday and Thursday. Earnings season also continues, albeit with a smaller number of prominent companies – Exxon being the major one in the first day of the week.
Tuesday 3.2.15 – The action kicks-off with early morning announcements from Australia about their trade balance and cash rate (at 12:30am and 3:30am GMT respectively). During the day several companies will be issuing their reports, most notably BP and Walt Disney.
The NZD will also come into the spotlight at 9:45pm when the chairman of their central bank will hold a press conference.
Wednesday 4.2.15 – The U.S. dollar will likely be the most discussed currency then, as numbers for the non-farm employment change and inflation will be released. GM and Merck will be the two major companies with earnings statements then.
Thursday 5.2.15 – The bank rate in Britain will be the focus of traders on Thursday come 12:00pm, followed closely by trade balance data for Canada and the U.S., although their impact might be lower, given that on Friday potentially more important data will be given.
Friday 6.2.15 – A dynamic last day of the week will see employment data again from Canada and the U.S. Market participants will be eager to learn if the American economy is indeed in recovery mode, giving something to cheer about while GDP growth in Europe and Asia weakens. It’s also an official holiday in New Zealand, so lower volume and movements are possible for the NZD/USD cross.
Our picks for weekend reading, adding more perspective to what happened over the last five days:
How much money did Alibaba CEO Jack Ma lose recently? (Bloomberg Business)
The euro is getting hits from left, right and center and the Economist have an interesting view on how the Greek elections have and will impact it. (Economist – registration required)
The Super Bowl is on late Sunday night (if you’re closer to GMT) and we were certain that someone made a connection with stock market performance and its winners. Although the “Super Bowl” indicator doesn’t “predict” in itself – it’s an excellent example of random correlations – it does have an impressive hit rate. (Wall Street Journal)
With volatility remaining high and possibly here to stay for some time, we revisit our article with tips on how to trade in such conditions. (Trading 212)
Jobs data will be in spotlight next week and we came across this warning about an abstract threat for jobs, but a threat none the less. (CNBC)