Julex Market Weekly 02-23-2014 | Stocks Changed Little Last Week

Top Stories Last Week

• Stocks Changed Little Last Week

The US stocks changed very little as investors tried to balance between soft economic data and their implication for monetary policies. Last week, S&P index dropped 0.1%, and MSCI EAFE index rallied 0.7%. The MSCI Emerging Market was down slightly 0.1%. Gold climbed 0.3%, and the SPGC commodity index rallied by 1.7%. The bond markets rose slightly. Barclays US Treasury index was higher by 0.1%, while US high yield bonds rose by 0.3%.

• US Housing Starts Dropped by 16%

U.S. housing starts recorded their biggest drop in almost three years in January, likely weighed down by harsh weather, but the third month of declines in permits pointed to some underlying weakness in the housing market. The starts tumbled 16.0% to a seasonally adjusted annual rate of 880,000 units, the lowest level since September. Groundbreaking for single-family homes, the largest segment of the market, fell 15.9% to a 573,000-unit pace in January. That was the lowest level since August 2012. Starts for the volatile multi-family homes segment dropped 16.3% to a 307,000-unit rate. Permits to build homes fell 5.4 percent in January, the largest drop in since June, to a 937,000-unit pace. Permits for single-family homes slipped 1.3 percent. Multifamily sector permits declined 12.1%.

• Bank of Japan Maintained Its Expansionary Policy

The Bank of Japan maintained its expansionary monetary policy and extended special loan programs to help buoy economic growth, signaling its resolve to keep the positive mood generated by premier Shinzo Abe’s reflationary policies from fading. The central bank reiterated its upbeat view on the economy, unfazed by recent signs of slowing growth and suggesting that any additional stimulus will be some time away. As widely expected, the BOJ maintained its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60-70 trillion yen ($589-$687 billion).

• US Inflation Rate Rose to 1.6% YOY in January

The consumer prices rose by as a seasonally adjusted 0.1% last month, matching forecasts, after rising 0.2% in December. Year-over-year, consumer prices rose at an annualized rate of 1.6% in January, in line with expectations and up from 1.5% in December. Consumer prices, excluding food and energy costs, inched up by a seasonally adjusted 0.1% last month, meeting estimates. Core consumer prices rose 0.1% in December. Core CPI increased at annualized rate of 1.6% in January, down from 1.7% in December and in line with expectations. Core prices are viewed by the Fed as a better gauge of longer-term inflationary pressure because they exclude the volatile food and energy categories. The central bank usually tries to aim for 2% core inflation or less.

• German Economic Sentiment Slipped to 55.7

Investor sentiment in Germany slipped in February as uncertainty about the US and emerging economies came to the fore, but the German recovery remains intact. The widely watched investor confidence index calculated by the ZEW economic institute fell by 6.0 points to 55.7 points in February. Weak employment figures as well as some softer leading indicators had sparked concern in the US that the current economic upswing could lose momentum. Volatile capital markets in some emerging economies reflected uncertainty regarding their economic prospects in the medium term.

Top Stories to Watch This Week

• US Durable Goods

US durable goods orders are likely to drop 0.5% due to harsh weather in January.

• Janet Yellen Testimony before the Senate

Federal Reserve Chair Janet Yellen’s semi-annual monetary policy testimony before the Senate Banking Committee will be held on Thursday.

• US GDP Growth

US GDP is expected to grow 2.7% YOY in the fourth quarter in the preliminary estimation.

• Euro Zone Inflation

Euro Zone CPI is expected to rise 0.7% YOY in January, well below the ECB target.

• Economic Growth in Germany and UK

German fourth quarter GDP is likely to rise 1.3% YOY and UK’s GDP growth is likely to be 2.8% YOY in the Q4.