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GDP Dominates News Flow

Gross domestic product figures from across the globe set the pace for markets last week as data shows that a global downturn is impacting certain economies across Europe and the United States, complicating central banking efforts to restore growth and international trade.

Last Week

A key determinant in momentum last week was the indication that global growth continues to falter as developed economies suffer from austerity driven policies and weak investment. US first quarter growth saw the second reading fall well below the first, printing at -0.70% versus 0.20% prior. UK GDP was unmoved, printing in-line with the prior figures, even though expansion was forecast for the economy. Spanish GDP managed to buck the trend of most other GDP reports, with growth accelerating modestly to 2.70% annualized versus 2.60% prior as the economy rebounds after years of secular decline. Swiss and Italian GDP did not fare as well, with Switzerland experiencing a quarterly contraction as Italy managed to avert an annualized decline in GDP, with the measure climbing to 0.10% year over year. US housing data continued to improve with home prices rising at a 5% annualized pace according to the latest S&P Case-Shiller home price index. This was further supported by gains in new home sales which rose by 6.80% over the prior month and pending home sales, which gained 3.40% over the same period. The Yen crossed a major threshold, with USDJPY breaking higher towards 13-year highs as Japanese unemployment improves while spending and inflation collapse in-line with expectations of the Bank of Japan.

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The Week Ahead

Much news is due from around the globe in the week ahead, with vital fundamental announcements scheduled from the United States and Europe. Markets will be closely monitoring developments in the jobs market with the US set to release nonfarm payrolls and unemployment number on Friday. The European Central Bank and Bank of England are both set to report on monetary policy, with interest rates forecast to stay on-hold. Australia will be announcing gross domestic product which will be preceded by an interest rate decision from the Reserve Bank of Australia which is expected to keep rates on hold at 2.00% as growth decelerates. From a global perspective, manufacturing data due from across the world will be a key determinant and driver of financial market momentum starting with PMI numbers from China. Also set to report on manufacturing are the United States, United Kingdom, Germany, France, Spain, Italy and the Euro Area in aggregate. Services data will also be announced, but is unlikely to have the same impact as manufacturing numbers. Meanwhile, repayment deadlines from Greece will be a major concern as negotiators fail to reach an accord between the Greek Government and creditors.

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