Julex Market Weekly 12-08-2013 | Global Stocks Ended the Week Slightly Lower

Top Stories Last Week

• Global Stocks Ended the Week Slightly Lower

Global stocks slumped for most of the week until the strong US job report on Friday rallied the markets. The week ended with slight decline across the board. During the week, S&P index remained flat, but MSCI EAFE index dropped 1.3%. The MSCI Emerging Market was down 0.4%. Gold continued dropping 1.8%, while the SPGC commodity index increased by 1.4%. The bond markets were sold off significantly as stronger job reports raised the expectation of tapering. Barclays US Treasury index dropped 0.9%, and US high yield bonds declined 0.1%.

• US Employment Rate Dropped to 7.0%, the Lowest Level in Five Years
U.S. Employers added 203K jobs in November, higher than the 180K Wall Street expected. September and October payroll numbers were revised up by a combined 8K. The unemployment rate fell to 7.0%, the lowest level since November 2008. The labor force participation rate, which measures the proportion of the population either working or looking for work during the month, ticked up to 63% in November after dropped to a 35-year low of 62.8% in October. The stubborn low labor participation rate poses a question on how strong the job market is. Despite Friday’s surprisingly strong report, some economists believe there are good reasons that the Fed is unlikely to pull the trigger at the Dec. 17-18 policy meeting. The central bank probably wants more evidence to be sure that the job gains are sustainable and wants to make sure lawmakers on Capitol Hill can strike a deal on the government budget in January.
• US Manufacturing Activities Expanded at the Fastest Pace in Two and Half Years

Manufacturing in the U.S. unexpectedly accelerated in November at the fastest pace in more than two years. The ISM manufacturing index rose to 57.3, the highest since April 2011, from 56.4 a month earlier. Export orders climbed, reflecting a rebound in the world economy that’s translating into more production and hiring. American factories are outpacing their global competitors benefit from a domestic housing recovery and strong consumer demands. Six straight gains in the ISM measure represent the longest such stretch since the first 10 months of 2009, when the economy was emerging from recession. The gauge has averaged 56.6 over the past three months, the strongest since May 2011.

• Chinese Economy Showed Continued Strength

China’s economy showed renewed signs of strength in October, according to gauges of manufacturing activity released on Friday, but officials acknowledged that growth remains unbalanced and small businesses continue to struggle. China’s official manufacturing Purchasing Managers’ Index climbed to 51.4 in November from 51.1 the month before, according to the National Bureau of Statistics, marking an 18-month high. But the data also showed a marked contrast between large and small manufacturers, with the reading for big companies rising to 52.3 while the one for small companies falling to 48.5.

• European Central Kept Interest Rates Historically Low

European Central Bank kept interest rate at record low of 0.25%, saying growth was poised “to gain some traction” as record-low interest rates began to flow to businesses and consumers in the form of cheaper loans, raised its forecast for 2014 slightly. At the same time, Mr. Draghi emphasized that the central bank could still do plenty to stimulate growth or head off deflation, a destructive downward spiral of prices. But he announced no new measures and gave no indication that any were imminent. That disappointed some who had hoped the central bank would, for example, announce a program to encourage banks to lend more.

• Bank Of England Kept Monetary Policy Intact

The Bank of England has kept interest rates at a record low of 0.5%, despite signs that the UK economy is improving. The decision was widely expected, given governor Mark Carney’s pronouncements that the Bank would not even consider raising rates until unemployment falls below 7%.

• Bank of Canada Kept its Interest Rate at 1%

The Bank of Canada kept its benchmark interest rate at 1% on Wednesday. The rate, known as the target for the overnight rate, sets the terms at which banks can borrow from the central bank and each other for short-term loans. The Bank continues to expect a soft landing in the housing market.’- Bank of Canada, in its rate decision. The rate has been at that level for more than three years, dating back to September 2010. The bank meets every six weeks to decide on interest rates, and has now decided to leave the rate unchanged for 26 consecutive meetings.

Top Stories to Watch This Week

• US Retail Sales

US retail sales are expected to rise 0.6% in November.

• Chinese Economic Data

Data on the Chinese exports, industrial production, consumer price index and retail sales will be released this week.

• Japanese GDP Growth

The Japanese GDP grew at annualized rate of 1.6% in the third quarter, according to economists.