Comments from Fed officials including Federal Reserve Chairperson-Designate Janet Yellen is expected to dominate the markets this week. Any hints that Yellen provides on tapering and future monetary policy is likely to stir volatility in the markets.
Last week, DOW Jones rose 0.9% and the S&P 500 (NYSE:SPY) gained 0.5% to end a fifth straight week of gains while NASDAQ (NASDAQ:QQQ) fell less than 0.1%.
Last week's non-farm payrolls data, which showed the economy added 204K jobs in October eased fears of employment sabotage caused by the government's shutdown. This positive economic news may not necessarily be good news for investors who have been riding high due to the rapid ascension of stocks driven upward by the uninterrupted flow of easy and cheap monetary cocaine by the Federal Reserve. While most analysts still don't expect the Fed to begin tapering this year, a string of mostly upbeat economic data, fuels speculation that the Fed may begin tapering as early as December 2013.
Following are Sentiment charts for S&P 500 (NYSE:SPY), DOW Jones, and NASDAQ (NASDAQ:QQQ).
Following is an economic overview for the week November 11 - November 15, 2013.
(All times EST)
Tuesday, November 12
04:30 — UK CPI (October 2013):
In September 2013, CPI remained unchanged at an annual rate of 2.7%. For the upcoming October report, analysts are expecting inflation to fall to 2.5%, mainly due to a fall in petrol prices. If inflation resumes its downward trajectory, it may influence the BOE's monetary policy.
Wednesday, November 13
04:30 — Great Britain Claimant Count Change:
As of October 2013, number of unemployed in Britain fell by 41.7K while the rate of unemployment remained unchanged at 7.7%. For the upcoming November report, economists are expecting unemployment to fall by 30.2K.
05:30 — Bank of England Governor Carney's Speech:
Governor Carney will deliver a speech in a press conference along with other Monetary Policy Committee members, about the Inflation Report. Volatility is often experienced during his speeches as investors attempt to decipher interest rate clues.
05:30 — Bank of England Inflation Report:
Bank of England will release its quarterly report that includes the bank's inflation outlook for 2013 and 2014. The report provides valuable insight into the bank's view of economic conditions and inflation — the key factors that will shape the future of monetary policy and influence their interest rate decisions.
10:30 — Crude Oil Inventories:
EIA (Energy Information Administration) will publish its weekly report on US oil and petroleum inventories for the week ending on November 8, 2013.
14:00 — US Federal Budget Balance:
This upcoming report for October 2013 will reflect government debt growth and thus may affect the shifts in US dollar. In September, government deficit declined by $75 billion. If the deficit continues to shrink, it could influence the decision for US policy makers about future budget cuts.
19:00 — Ben Bernanke's Speech:
Fed Chairman is expected o speak about the history of the Federal Reserve Bank at the town hall meeting with educators. As head of the central bank, who controls short term interest rates, he has more influence over the nation's currency value than any other person. Traders scrutinize his public engagements as they are often used to drop subtle clues regarding future monetary policy.
Thursday, November 14
04:30 — UK Retail Sales:
Monthly report will present retail sales for October 2013. In September, retail sales increased faster than expected (0.6% vs. 0.4%), supporting hopes that the economy recorded strong Q3 growth.
08:30 — US Unemployment Claims:
Weekly report will refer to changes in initial jobless claims for the week ending on October 25, 2013. Last week jobless claims decreased by 12K to reach 350K. This upcoming weekly update may affect the US dollar and consequently commodities and stocks markets.
08:30 — Canada Trade Balance (m/m):
In August 2013, exports increased by 1.8% and imports grew by 2.1%. As a result, deficit widened from $1.2 billion in July to $1.3 billion. For the upcoming October report, economist are expecting a deficit of $1.2 billion.
08:30 — US Trade Balance:
This upcoming report will present US trade developments for September 2013. Based on the previous update for June 2013, deficit expanded to $38.8 billion, suggesting trade will probably not be much of a boost to growth in Q3.
10:00 — Fed Chairperson-Designate Yellen's Testimony:
Vice Chairman of the Federal Reserve Janet Yellen will testify in front of the Senate Banking Committee on banking, housing, and urban affairs. This will be her confirmation hearing for her nomination of the Chairman of the Federal Reserve position. The testimony usually comes in 2 parts: first she reads a prepared statement (a text version is made available on the Fed's website at the start), then the committee will hold a question and answer session. Since questions are not known beforehand they can make for some unscripted moments that lead to heavy market volatility. As the Chairperson-Designate of the central bank, high volatility will likely be experienced during her speech as the markets attempt to predict her affect and outlook on the bank's future monetary policy.
Friday, November 15
05:00 — Euro Zone CPI:
Based on the update in October, the annual CPI declined to 1.1%, which is well below ECB's target inflation rate. Much to everyone's surprise, last week the ECB cut its main rate to 0.25% from 0.5%, citing deflationary concerns in the economy. If inflation continues to dwindle, it could further influence ECB's monetary policy.
08:30 — Canada Manufacturing Sales:
Monthly report will present manufacturing sales in Canada for September 2013. The report may affect the USD/CAD currencies pair, which is correlated with commodities. In August 2013, manufacturing sales fell by 0.2%.
09:15 — US Industrial Production:
Monthly report will present changes in industrial production for October 2013. In September, industrial production increased by 0.6%.
This commentary is for informational purposes only and does not constitute investment advice. The opinions offered herein are not recommendations to buy, sell or hold securities. Market IQ expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.