Julex Market Weekly 02-24-2013 | Emerging Market Stocks and Commodities Declined as Oil Prices Dropped

Top Stories Last Week

• Emerging Market Stocks and Commodities Declined as Oil Prices Dropped

Emerging market stocks dropped to seven-week low as a report signaled the euro-area’s economy contracted more than forecast and concern grew that the U.S. Federal Reserve may slow the pace of stimulus. Commodities tumbled as oil inventories were reported higher than expected. S&P 500 Index dropped slightly by 0.1%, while MSCI EAFE index lost 0.8% and MSCI Emerging Market Index tumbled by 1.6%. Gold dropped by another 1.8% and the GSCI commodity index lost 3.0%. The bond markets rose for the week, Barclays US Treasury index gained 0.4% while US high yield bonds gained 0.4% as well.

• US Inflation Remained Subdued

US Consumer Price Index was flat in January and was up 1.6% from one year earlier. It is lower than the market consensus of 1.8% YOY. With inflation running under 2%, it’s considered subdued and not a threat to the broader economy. The Fed will take a comfort with its quantitative easing program in place. However, economists expect to see prices rise slightly in coming months, driven largely by higher gas prices. The CPI report showed gasoline prices fell in January.

• Walmart Beat Earning Estimates

Walmart, one of the world’s largest retailers, reported earnings for Q4 of 2012. The results showed strong growth in a difficult market. Net profit rose 8% from the same period last year came in at $5.6 billion. The revenue also increased about 4% at $127.9 billion. The company had seen solid sales growth in China, often regarded as the next big area for expansion.

Top Stories to Watch This Week

• Sequester Spending Cuts will Take Effect on March 1

The automatic spending cuts, so-called Sequester, will take effect in March 1. About $85 billion could be taken away from the government’s budget. There is no progress towards to a solution yet.

• Bernanke will Testify before Congress

Fed Chairman Bernanke will testify before both House and Senate this week. His testimony is about the economic outlook. The market’s focus will be on the Fed chief’s comments and discussion of the ongoing quantitative easing program.

• US and China Manufacturing Activities

PMI manufacturing Indices are expected to continue indicating expansions in US and China manufacturing sector.

• Italian election

The Italy will hold the general election this week. It is interesting to see if the elected party will commit to continuing structured reform.