The US Federal Reserve decided to keep its monthly asset-purchase programme and the current close-to-zero interest rate after a highly anticipated two-day meeting last week. Chairman Ben Bernanke said the US central bank will monitor closely the country’s economic performance and if the Fed’s forecasts turn out correct, the stimulus measures are likely to begin slowing down by the end of 2013, and completely stop by mid-2014.
Bernake’s words sparked huge sell-offs on the US stock markets, with the Dow registering its biggest fall this year, ending the week with a 1.75% loss at 14,802 points. The S&P500 dropped by 2.03%, closing at 1593 points, while the Nasdaq100 fell by 2.28%, with its last quote on Friday being 2876 points.
European markets also reacted negatively to Bernanke’s speech. The leading European indices dived deeper into the red pool of the charts as Greece’s Democratic Left party withdrew its support for Antonis Samaras government and put a big question mark on the stability of the country’s cabinet. The French CAC40 reported the slightest fall of all indices: 2.80%, while the Italian S&P/MIB registered the biggest decline by 5.43%.
Contrary to most global market movements, Japan’s Nikkei225 surprised market participants with a rise by 6.61%, reaching 13,350 points. The reason for the upward trend is considered the yen’s depreciation which was almost 350 pips against the dollar and 250 pips against the euro during the past week.
Forex
Apart from the yen’s decline, investors also witnessed a surge by the U.S dollar, as its price rose against the euro, the sterling, and also the Aussie. The EUR/USD ended the week with a loss by more than 220 pips and closed at 1.3123 on Friday. Meanwhile, the GBP/USD wiped 284 pips off its value, while the AUD/USD erased 356 pips, ending the week at 0.9233.
Commodities
The trading session on the commodity markets was quite interesting, especially for the precious metals. Gold price again dropped below the psychological level of $1300 per troy ounce, falling to $1294 and reaching its lowest value in the last 30 months.
There was also a sharp drop in the price of silver, which reached $20.10 per troy ounce, down 9% for the week.
What to expect this week?
The first trading day of this week is offering a rather empty basket of economic events, with the main entry coming from Germany’s IFO Business Climate Index for June. Tuesday is shaping to be busier, with the UK’s Housing Prices and Mortgage Approvals due to be released, as well as the US Durable Goods Orders for May, along with the country’s Consumer Confidence for June and New Homes Sales, also for June. Wednesday’s highlights will come from the UK’s Inflation Reports Hearings and the US GDP. Thursday will offer more action, starting with a two-day meeting of the European Council, moving to Germany’s Unemployment data for June, the UK’s GDP, both on annual and quarterly basis, along with the Eurozone’s Economic Sentiment for June. Later in the day, the US session is due to produce the country’s Personal Income and Outlays, with more data coming from Japan’s CPI results, Unemployment data and Industrial Production. Friday will see Germany’s Retail Sales and CPI along with the University of Michigan’s Monthly survey on the US Consumer Sentiment.
