Global Uncertainty and Falling Commodities

Weekly Report - 03/08/2015


Uncertainty around the globe is growing in the wake of falling commodities prices and the influence they carry on life-altering figures like unemployment and wages. People from every industry, sector and socio-economic slice are feeling the heat as assets like gold, crude oil and currencies are more volatile than ever.

Weekly Review

Despite these trends, equity markets around the globe are very active, and will probably never cease to be. The only exception to this statement is the Chinese stock market, which through internal and external factors has slowed considerably due to failing monetary policy designed to curb issues with the Shanghai Composite Index. Last session the index fell by -1%. Other disappointing figures include the US GDP report, with the Q2 figures widely expected to be a success but largely disappointing after slow growth in Q1. Personal consumption expenditure in Q2 rose to 1.8% from 0.8%, getting close to the Fed’s target of 2.0%. This indicates that monetary policy tightening might come earlier than expected, while the FOMC seems confident on labour employment but not for inflation. Japan has escaped deflation as of yet. Acceleration of prices in the country has increased with a 0.4% pace since May. On the contrary, household spending in July was down 21%. The labour market and inflation still remain a concern. Lower prices led to a boost of the industrial production which helped in raising exports. Balance of payments will not experience a dramatic change for the reason of the high debt present in Japan.


The Week Ahead

Reports on Norwegian employment are expected to come with news of a slight increase in unemployment in July. From Canada, the month-over-month GDP from May to June is expected to be unchanged and this may cause the annual growth rate to decelerate. This also may weaken the CAD somewhat. In the US, the employment cost index (ECI) for Q2, a closely followed gauge that reflects how much firms and government pay their employees in wages and benefits will be released. It is expected to decelerate a bit from Q1, which could weaken USD temporarily. The final University of Michigan consumer sentiment for July is coming out also, along with the surveys of 1-year and 5-to-10 year inflation expectations. The Chicago Purchasing managers’ index for July is also due to be released. The Non-Farm Payroll document data will be revealed next week on Friday, likely with insight abound after a predicted rise in employment. The complex has survived an improvement in 2nd quarter U.S. economic growth. There are only two labour reports before the September Fed meeting, leaving room for a potentially volatile reaction if this report misses its mark. Early estimates predict the economy added 224,000 new jobs in July.


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