\n\tBy Rudi Filapek-Vandyck<\/p>\n
\n\tI returned from my European trip over the weekend and couldn't help but sense a strong deja-vu experience. In January, after I returned from my visit to Zimbabwe, I was forced to include in my first analysis for the new calendar year a clear bearish message. Today, as I freshly returned from yet another insightful journey, my position is pretty much the same.<\/p>\n
\n\tThe bears are in charge of global risk assets and their dominance will be felt across financial markets this week, starting today, on the first day of the new week.<\/p>\n
\n\tOne story that should have caught everyone's attention over the weekend was printed on Saturday in the Sydney Morning Herald. The story points out that price charts for the Aussie dollar are suggesting more weakness should be expected, with technical analysts forecasting we could see the currency back below 80c against the US dollar in the months, if not weeks ahead.<\/p>\n
\n\tWhy is this story worth highlighting? Because if correct, this could signal that global risk appetite is about to take another dive into the abyss. I have written repeatedly and extensively over the past months about how the EUR\/USD cross has become the most reliable overall gauge for global risk appetite. Other experts, however, preferred to keep an eye on the EUR\/YEN or the AUD\/USD.<\/p>\n
\n\tAll in all, however, the SMH story tells us nothing that Friday's price action on US financial markets hadn't already told us: the world is becoming increasingly uncomfortable with the new direction of global financial developments and economic data. This results in weaker share markets and this in turn results in bearish signals from a technical analysis point of view.<\/p>\n
\n\tThe bears are in charge, so much should be obvious by now.<\/p>\n
\n\tBefore I move on to what is likely to land on investors' radar this week, here's a brief reminder colleague Greg Peel left me over the weekend. I thought it might be useful to simply share it with you all:<\/p>\n
\n\tOn Friday, the Dow fell 323 points or 3.2% to 9,931. The S&P fell 3.4% to 1064 and the Nasdaq fell 3.6%.<\/p>\n
\n\tIncreasingly optimistic forecasts during last week for Friday's US jobs number were setting Wall Street up for disappointment. Consensus had the number at 538,000 with the inclusion of 411,000 temporary census workers. The result of 431,000 was thus a huge disappointment, given it represented only 20,000 new jobs outside census hiring.<\/p>\n
\n\tThe unemployment rate nevertheless fell from 9.9% in April to 9.7% in May. This was actually also disappointing because it represented 322,000 unemployed workers leaving the jobs market – effectively giving up – rather than registering for benefits. In April, 805,000 hopefuls had returned to the jobs market given the more buoyant prospects perceived at the time.<\/p>\n
\n\tThe jobs data were a big kick in the teeth for a market hanging on to the notion of a recovering US economy. The words “double dip” are now being more emphatically uttered on Wall Street.<\/p>\n
\n\tOn Thursday night the Hungarian deputy leader had made what some thought might have been a disingenuous throwaway line that “Hungary could be the next Greece” given the parlous state of its budget deficit. While the euro was cautiously weaker, stock markets remained supported. But on Friday night a government spokesman made no bones about confirming the debt situation in Hungary was indeed “grave”. This time the world paid attention.<\/p>\n
\n\tHungary is an EU member but not a eurozone member, so while the Hungarian forint fell another 2% against the euro in Friday's trade, the euro fell 1.5% against the US dollar to US$1.1973, marking a new four-year low.<\/p>\n
\n\tThe US dollar index rose over 1% to 88.26 and the Aussie fell over two cents to US$0.8233.<\/p>\n
\n\tCommodities were trashed. Oil fell US$3.10 or 4% to US$71.51\/bbl. In London, nickel and lead fell 3%, aluminium and copper 4%, zinc 5% and tin 8%. Copper has now broken down through technical support. Silver fell 3%.<\/p>\n
\n\tThe flight to quality returned in earnest. Gold jumped US$12.20 to US$1220.00\/oz despite the US dollar rally, while the benchmark US ten-year bond yield fell 16 basis points to 3.21%. The VIX volatility index jumped 20% to 35.<\/p>\n
\n\tThe SPI Overnight fell 114 points or 2.6%.<\/p>\n
\n\tWhile the Hungarian situation reignited European fears at a time when the EU is still trying to get its euro stability fund bedded down, the US jobs number shattered confidence. We are no longer looking at a consolidation phase.<\/p>\n
\n\tWhat Greg means to say in that last sentence is what I pointed out in the opening sentences of this story: the bears have taken charge.<\/p>\n
\n\tAs far as the week ahead is concerned, Fed Chairman Ben Bernanke is expected to reaffirm the Federal Reserve policy to keep the benchmark interest rate unchanged since the labour market is still weak as show by last week's payrolls data. Still, US retail sales for May might show some gains due to an improvement in consumer's confidence. Also, the US trade deficit may widen in April with imports rising and exports unchanged.<\/p>\n
\n\tAlso scheduled are the Fed’s Beige Book on Wednesday and the Michigan Consumer Confidence (June Preliminary) on Friday.<\/p>\n
\n\tThis week's calendar also includes a raft of China data, including trade balance, retail sales, industrial production, fixed investment and the CPI (all April, and due Thursday and Friday, but mostly on Friday).<\/p>\n
\n\tIn the Euro area, the European Central Bank is expected to leave its interest rate at 1%. Yet, the market is looking for the announcement of a new long term refinancing operation.<\/p>\n
\n\tIn Japan, Naoto Kan became the new prime minister last week. The new administration is likely to support a weaker yen and implement new measures to reduce huge public debt. Also, the nation's first quarter GDP may be revised slightly down.<\/p>\n
\n\tIn the United Kingdom, the Bank of England is expected to keep its current monetary policy unchanged. In addition, the UK's trade deficit has shrunk, as exports probably recovered and with economists expecting retail sales to rise.<\/p>\n
\n\tIn New Zealand, the economic outlook has improved recently and the Reserve Bank -believe it or not- might decide to lift its official cash rate this week.<\/p>\n
\n\tThis week's calendar in Australia starts with ANZ job ads today, ahead of Labour market data (May, Thursday), which will be key for overall domestic sentiment. Further, we are awaiting the release of the NAB Survey (May, Tuesday) after last month’s dip in both conditions and confidence. The Westpac-MI Consumer Confidence (June, Wed) could equally prove significant, as could be Housing Finance (Apr, Wed).<\/p>\n
\n\tBut first we have to deal with the follow up on Friday's market action offshore.For further global economic release dates and local company events please refer to the <\/em>FNArena Calendar<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" A wrap of events affecting the market on Friday night and the weekend and a preview of the week ahead.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[84],"tags":[46],"acf":[],"_links":{"self":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/56711"}],"collection":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/comments?post=56711"}],"version-history":[{"count":0,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/posts\/56711\/revisions"}],"wp:attachment":[{"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/media?parent=56711"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/categories?post=56711"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/staging.fnarena.com\/index.php\/wp-json\/wp\/v2\/tags?post=56711"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}