Julex Market Weekly 11-17-2013 | Global Financial Markets Rallied

Top Stories Last Week

• Global Financial Markets Rallied

Global financial markets rallied as investors speculated the Fed’s tapering of bond purchase program may delay after Yellen’s confirmation hearing in the Senate. In the week, S&P index rose 1.6%, and MSCI EAFE index climbed 1.5%. The MSCI Emerging Market Index rallied by 2.6%. Gold remained unchanged, and the SPGC commodity index went up by 1.3%. The bond markets rallied as well. Barclays US Treasury index rose by 0.7%, while US high yield bonds was up by 0.3%.

• Yellen Sailed through the Senate Confirmation Hearing Smoothly

Janet Yellen sailed through questions about the financial crisis, the Fed’s stimulus efforts and banking regulation, as the Senate Banking Committee weighed her nomination as a Fed chairman. While a few senators raised concerns about the more than $3 trillion in stimulus the Fed has been injecting into the U.S. economy, Yellen defended the central bank with ease, often pointing to high unemployment as her top concern. “This is a virtually unprecedented situation,” she said, referring to the 4 million Americans who have remained unemployed for more than six months. Asked about the risks of more stimulus, Yellen repeatedly told the senators she currently sees no major bubbles forming, including in the stock market and housing market. Stocks have been routinely hitting new highs and housing prices have been rising this year, driven largely by the Fed’s policies.

• Euro Zone Economic Growth Faltered

The euro-zone economy’s recovery from its long slump lost its momentum in the third quarter, The economy of the euro zone grew by just 0.1% in the third quarter, down from 0.3% growth in the previous quarter. Although growth is expected to improve slightly next year, the euro zone is still a long way from regaining the level of output and jobs it had before the financial crisis that began five years ago. In much of the Continent, a meager recovery feels like continued recession to many. Particularly in indebted countries of Southern Europe, households and governments are struggling to pay down towering debts from incomes that are under pressure.

• Euro Zone Inflation Rate Fell to 0.7%, a Four-Year Low

Falling fuel and telecoms prices drove euro zone inflation down to its lowest level in almost four years in October, fleshing out the surprise drop that prompted the European Central Bank to cut interest rates to a record low. Consumer price inflation in euro zone was 0.7% YOY last month, confirming its earlier estimate that is far below the ECB target of 2%.

• US Industrial Production Fell by 0.1% Unexpectedly

U.S. industrial production unexpectedly fell in October as output at power and mining industries declined, but a third straight month of gains in manufacturing suggested the economy remained on a moderate growth path. Industrial output slipped 0.1% after advancing 0.7% in September. Manufacturing output increased 0.3% even as automobile assembly fell for the first time since July. The sector is regaining some momentum after hitting a soft patch early in the year.

Top Stories to Watch This Week

• US Inflation Rate

US CPI is expected to rise 1.1% YOY in October.

• US Retail Sales

Retail sales in the US are likely to rise 0.1% in October, according to economists’ consensus.

• Bank of Japan Monetary Policy

Bank of Japan will meet this week. Analysts expect BOJ to keep interest rate policies unchanged.