26 November 2012
Signs of optimism have emerged for the debt ridden European economy even as talks over the U.S. fiscal cliff resume post thanksgiving. The U.S. equity markets were performing well last week, and the momentum might get some help from two key stock market deals this week. One would help avoid the U.S. fiscal cliff while the other looms as a dangerous threat wherein Greece might default on its massive debt.
The overall performance of the stock markets last week was quite impressive especially for Europe as the Stoxx 600 index managed to stay afloat despite political unrest. The same trend was seen in the U.S. as well with the stock markets doing well despite a shorter week thanks to Black Friday.
White House officials and the Congress are all set to resume talks on the fiscal cliff this week. President Barack Obama, on 18th November, said that he was very confident about a new U.S. budget that would help avoid the fiscal cliff. The U.S. markets were performing really well last week despite the Thanksgiving holidays shortening the week. DJIA rose 3.3%, Nasdaq gained 4% and the S&P’s 500 climbed 3.6%.
Investors in the U.S. are currently narrowing their focus on latest reports for the week’s trading activities. Key reports to be released this week include the consumer confidence report and one on durable goods this Tuesday, the weekly jobless claims report on Thursday and the personal income and outlays along with the Chicago Purchasing Managers Index, which is set on Friday to end the week’s activities. The Federal Reserve’s Beige book is probably the most important event of the week and is set to release this Wednesday.
The U.S. Treasury will be auctioning USD35 billion 2-year notes this Tuesday, USD 35 billion 5-year securities on Wednesday and USD29 billion 7-year debt this Thursday. Standard and Poor’s Case-Shiller home price index for September is set to be released on Tuesday and the report is expected to display an increase for the 8th month in a row. Wednesday will also see a new home sales report for the month of October and Thursday will see the October pending homes data. Both these reports are expected to indicate a stronger market.
While things are looking good in the U.S., signs of optimism emerge for Greece in the European Union. Olli Rehn, the European Union commissioner commented last Thursday that a deal on Greece was imminent as the ECB, IMF and the Eurozone finance ministers met once again on Friday.Negotiations with Greece continue this week
The Greek finance minister said on Friday after meeting with the IMF’s managing director and the European Union Officials that he was confident that the IMF will ease early deficit targets that are imposed on the debt-stricken European nation. Such a move would help Greece obtain more funds and would probably avoid a default.
While Greece is running from pillar to post to avoid defaulting on its debts, the Stoxx Europe 600 climbed 4% for the week. This was the first time the Index rose consistently for 5 days in a row since July 2011. The stocks spiked even after talks on the next seven-year budget for the European region did not go down well and despite a failed two-day meeting last week. As a result, Herman Van Rompuy, President of the European Council made a decision on abandoning the summit on 2014-20 seven year budget that is estimated to be around one trillion Euros, and would instead try to reach a compromise regarding the same early in 2013.
Europe was in for a surprise last Friday as the Ifo Institute’s Business Climate Index climbed unexpectedly, featuring its first rise after 8 months. This played an important role in the Euro finishing the week on a high, climbing 1.8% against USD and 3.2% against JPY.
The European calendar too is full of life this week with several noteworthy events taking place every day. The Italian and German consumer confidence data will be heralding the week. The second estimate of the third quarter GDP data and the business investment data is due on Tuesday. Wednesday is packed with the ONS underemployed workers report and the Eurozone money supply data. The BOE financial stability report, Mortgage approvals, Money supply data and the CBI distributive trades survey are due on Thursday. The week ends with Eurozone unemployment rate and the GfK consumer confidence survey.
The overall impression seems a bit shaky as far as Europe is considered. The good run of the stock markets may continue this week too but keep a wary eye on the statistics and reports while trading binary options this week.