Stock markets fell globally this week as weak data from China and Europe raised worries about slow global growth. Additionally, Federal Reserve Chairman Ben Bernanke sent ambiguous signals in Congress, hinting at a potential lessening of Fed asset purchases, aiding the sell-off.
Following is an economic review for the week May 20 - May 24, 2013.
Tuesday, May 21
Japanese Monetary Policy Statement:
Bank of Japan stood pat on its current monetary policy. The Bank announced that it will continue with quantitative and qualitative monetary easing, aiming to achieve price stability target of 2%, as long as it is necessary for maintaining that target in a stable manner.
Great Britain Consumer Price Index (CPI):
A weaker than expected data was released (2.4% vs. 2.6%). The outcome underpinned a dovish shift in investors' Bank of England policy outlook, weighing on the British Pound.
Wednesday, May 22
Canada Core Retail Sales:
Retail sales were flat in March, holding at $39.5 billion.
U.S. Existing Home Sales:
US sales of previously-owned homes rose to a three-and-a-half-year high in April in another sign of gathering momentum in the country's housing market recovery. Existing home sales rose 0.6% to a seasonally adjusted annual rate of 4.97 million, the most since November 2009.
Fed Chairman Bernanke Testified:
The market exploded out of the gate on his testimony, accelerating to new all-time highs. Bernanke told Congress that it's too soon for the central bank to let interest rates rise, saying the economy would face a "substantial risk" if the Fed tightened monetary policy. But once Bernanke started to pump the brakes and uttered the words, "On the other hand," markets turned on a dime and staged a noteworthy reversal.
Crude Oil Inventories:
Crude oil inventories fell 300,000 barrels to 384.6 million barrels, compared with a 600,000-barrel decline forecast by analysts. Oil futures extended their recent losses following the release of the report.
FOMC Meeting Minutes:
Fed minutes revealed more discussion about pulling back the reins on Quantitative Easing. A large number of FOMC participants were pushing to taper asset purchases as early as June, when the next meeting is scheduled. It was no surprise that the minutes released were less market-friendly and therefore, caused the sell-off to intensify.
Thursday, May 23
China Factory Orders:
China's factory activity shrank for the first time in seven months in May as new orders fell (HSBC Purchasing Managers' Index for May fell to 49.6, slipping under the 50-point level demarcating expansion from contraction) entrenching fears that its economic recovery has stalled and that a sharper cool down may be imminent. Asian stock markets fell after the report, with Nikkei plunging 7.3% — its biggest drop in two years.
German Flash Manufacturing PMI:
Preliminary German PMI Manufacturing increased to 49 points in May, from 48.1 points in April. The result came in above market consensus of 48.5 points.
Second Estimate GDP (q/q):
Second estimates of UK GDP supported the original signs that the economy grew more than forecast in the first three months of this year, but the breakdown suggested that the trend is unsustainable.
U.S. Unemployment Claims:
Unemployment claims fell more than expected (340K vs. 345K). An improving jobs market means that Quantitative Easing taper is now more likely to happen sooner than later, much to the dislike of the market.
New Home Sales:
New home sales rose in April to the second highest level since the summer of 2008 while the median price for a new home hit a record high — a further sign that housing is recovering. Sales of new single-family houses surged to an annual pace of 454,000, up 2.3% from March and 29% from a year earlier.The median sales price rose to $271,600, compared to an average of $256,200 for the first three months of the year.
Natural Gas Storage:
Natural gas prices jumped up after official data showed supplies rose less than expected last week. Inventories rose by 89 billion cubic feet, below expectations for an increase of 91 billion cubic feet, reflecting heightened demand.
ECB President's Speech:
Draghi's speech had a very optimistic tone. He said that three of the weakest Euro zone economies — Ireland, Spain and Portugal — had all made 'impressive' improvements in economic performance, mainly down to increased exports. And that the turnaround has been achieved despite the 'anemic' lending from banking. Draghi further added that the Euro as a currency has remained steady. '
Friday, May 24
Core Durable Goods Orders:
US core durable goods orders rose more-than-expected last month (1.3% vs. 0.5%)
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