Weekly Outlook of Financial Markets for January 7-11

During last week, the high volatility in the financial markets returned following the New Year’s holiday. Soon after the fiscal cliff was averted, the markets rallied. Soon after, however, certain markets such as precious metals resumed their downward trend. The speculations around the future steps of the FOMC and the uncertainty around the open budgetary issues that will be dealt in the weeks to follow may have contributed to the weakness of precious metals and stock markets.   Last week several U.S reports were published: U.S non-farm payroll rose in December by 155k; the U.S jobless claims rose by 10k to reach 362k. The U.S payroll report may have adversely affected bullion rates on Friday. Next week several reports and events may affect the financial markets. These include: U.S trade balance, ECB rate decision, Canada’s trade balance, Japan’s trade balance, BOE rate decision, U.S non-farm payroll report, EU unemployment rate, China’s new loans, Australia’s trade balance, German factory orders, and U.S. jobless claims. Here is an economic news calendar projection for January 7th to January 11th regarding the U.S, EU, Japan, Canada, China, Australia and Great Britain.   

(All times GMT):

Monday, January 7th

09:00 – Swiss National Bank Foreign Currency Reserve: The Bank will publish its current Foreign Currency Reserve; according to the latest update, the forex reserves edged up compared to the previous week;

02:30 – Australian Trade Balance: The upcoming report will refer to November 2012. In the previous update, the seasonally adjusted balance of goods and services expanded its deficit to $2,088 million in October. The export of non-monetary gold rose by $102 million; if the gold exports will continue to rally in November, it might suggest an increase in demand for non-monetary gold (see here last report);

Tuesday, January 8th

10:00 – Euro Area unemployment rate: the rate of unemployment of the Euro Area edged up by 0.1% to 11.7% in October. This mean there is an ongoing slow growth in the unemployment. If in the upcoming report this trend will continue, it may adversely affect the Euro;

11:00 – Euro Area Retail Sales: This monthly report will show the shifts in EU retail sales for November. In October 2012, retail sales declined by 1.2%; if this report will continue to show a decline in sales index, it might weaken the Euro;

11:00– German Factory Orders: This report will pertain to the shifts in the factory orders of Germany for November; in the previous report the German factory orders rose by 3.9% (M-o-M);

Tentative –China’s Trade Balance: as of the previous monthly update, China’s trade balance fell to a $19.6 billion surplus; if the surplus will further dwindle, it could indicate that China’s economic growth is slowing down and thus may adversely affect prices of commodities.

Tentative – China New Loans: This report will refer to the recent developments in China’s new loans given during last month. According to the recent report, the total loans changed direction and slightly increased; this report is another indicator to the economic progress of China;

Wednesday, January 9th

10:00 – Final EU GDP 3Q 2012 Estimate: This will be the final estimate of EU’s third quarter 2012 real GDP growth. In the recent estimate the EU (27) GDP in the third quarter grew by 0.1% (quarterly basis); in the 2Q2012 the GDP growth rate was -0.2%. This shows a modest growth in the EU’s GDP. If there will be a sharp shift in this estimate it could also affect not only the Euro but also commodities prices;

11:00– German Industrial Production: This report will pertain to the shifts in the industrial production of the German for November; in the previous report the German industrial production declined by 2.6% (M-O-M) during October;

15:30 – U.S Crude Oil Stockpiles Report: the EIA (Energy Information Administration) will be publish its weekly report on the U.S oil and petroleum stockpiles for the week ending on January 4th; in the recent update for December 28th, stockpiles fell by 10 ml bl to reach 1,784.4 ml bl.

18:00 – U.S 10 Year Bond Auction: the U.S government will issue its monthly bond auction; in the previous bond auction, which was held at the second week of December, the average rate reached 1.65%; if the rate will continue to fall, it could suggest that more traders become more bearish;

Thursday, January 10th

12:00 – Great Britain Bank Rate & Asset Purchase Plan: Bank of England will publish its basic rate for January 2013 and of any developments in its asset purchase plan; as of December BOE kept rate unchanged at 0.5% and the asset purchase plan was left at £375 billion;

12:45 – ECB Press Conference and Euro Rate Decision: Back in July 2012 the ECB decided to reduce its cash rate by 0.25pp to 0.75%. Since then, however, the speculations around another rate reduction were high. The ECB has ample reasons to cut the rate again: the economic situation in EU isn’t improving, the inflation and monetary development are still stable, the Fed’s stimulus plan pressures up the Euro, and many EU banks continue to struggle. Thus, the ECB might decide to cut the rate by another 0.25pp in the near future. If ECB will cut the rate again, it may adversely affect the Euro to US dollar exchange rate;

13:30 – U.S. Jobless Claims Weekly Report:  this report will refer to the weekly changes in the initial jobless claims for the week ending on January 4th; in the previous report the jobless claims rose by 10k to reach 372k; this upcoming weekly report may affect the U.S dollar and consequently commodities;

15:30 – EIA U.S. Natural Gas Storage Update: the EIA weekly update of the U.S. natural gas market will pertain to the recent developments in natural gas production, storage, consumption and rates as of January 4th; in recent weekly report, natural gas storage decreased by 135 Bcf to 3,517 Bcf;

00:50 – Japan Current Account: this report will show the changes in the difference between exports and imports for Japan during last month; this news may affect the strength of the Yen;

Friday, January 11th

09:30 – Great Britain Manufacturing Production: this report will present the yearly rate of GB’s manufacturing production for November; in the previous report regarding October the index decreased by 1.3% (M-2-M); this news may affect the British Pound;

13:30 –Canadian Trade Balance: In the recent report regarding November 2012, exports rose by 1% and imports declined by 1.2%; as a result, the trade deficit contracted from a $1 billion deficit in September to $0.169 billion deficit in October; this report may affect the Canadian dollar which tends to be strongly correlated with prices of commodities;

13:30 –American Trade Balance: This monthly report for November will show the recent shifts in imports and exports of goods and services to and from the U.S, including commodities such as oil and natural gas; according to the recent American trade balance report regarding October the goods and services deficit rose during the month to $42.2 billion;

19:00 –U.S. Federal Budget Balance: this upcoming publication will present the changes in the U.S federal balance for December 2012; this report indicates the government debt growth and thus may affect the U.S dollar. In the previous report regarding November the deficit grew by $172 billion to a deficit of $292 billion for the fiscal year of 2013. In comparison, the deficit in the same time in 2012 was $235 billion; this is an increase of 24% compared to 2012.

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2 comments for “Weekly Outlook of Financial Markets for January 7-11

  1. January 6, 2013 at 9:48 pm

    Basal III Bank mangers meeting held in Basal Switzerland. Is
    currently in the process of making international banking rule that allow banks to lend money at the equivalent of the market value gold for their reserve requirement. My understanding is the rule change will increase gold demands due to banks buying more gold in order to make greater loans.

    Initial evaluation says gold price will continue to to slide for a period but will then head up due to bank buying activities. If banks want to make more loans, they will need to hold more gold reserves. Side effect of the increase gold reserves will be to sure up value of fiat currencies. Thus increasing international
    economic stability.

    Does any of these remarks belong in the weekly outlook remarks?

    Respectfully

    James

    • January 7, 2013 at 3:38 pm

      Hi James,

      Thanks for your comment. It’s an interesting question with no clear answer. For one thing the full implementation of Basel III will only start in January 2019. Second, Basel III moves gold from tier 3 to tier 1 so banks’ current gold reserves will be more “valuable” for their capital requirements. So this might not necessarily increase the demand for gold just make better use for it. Third, unless forex reserves will lose their value with respect to gold (too many assets purchase programs, Quantitative easing plans, inflation etc.) so that banks will want to hold more of gold as a reliable capital, then this new Basel III plan won’t raise the demand for gold.
      Another point of view you can find here:
      http://alturl.com/ysprk

      These are my two cents,
      Lior

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