Flights to safety as volatility stuns investors

Last week the main driver of the markets was the flight to safety as investors came out of riskier assets and flooded into the cheaper Euro and JPY currencies.  It saw the equity markets in Europe fall around 5%, bringing its decline for 2016 to as much as 15% as well as losses in the FTSE 100 and the S&P, both down by over 2%.  The single currency made gains against the Dollar and the Pound as this risk aversion move continued throughout last week, with Sterling falling to 13 month lows against the Euro. 

The big event was from the US where Fed Chair Janet Yellen testified before the House of Financial Services Committee.  Many were looking for further guidance as to if and when rates may rise again from the US, but no clearer picture was given by Janet Yellen.  Pointing to higher risks seen from China’s slowdown and the Greenbacks rise if continued could prove to weigh on the economy of the US and possibly see a slowdown of economic activity and the labour market.  As always though Ms Yellen argued that continued wage growth and recent jobs data seen of late shows the economy is supported with current conditions, signaling the possibility of gradual interest rate increases this year.

Monday 

The US markets will be closed due to President’s day, therefore the focus is on the head of the ECB Mario Draghi.  Draghi is set to speak in Brussels at 2pm on the monetary policy before the Economic and Monetary Affairs Committee,  markets will watch for rhetoric to see if the Central Bank will be adding further stimulus to help combat the inflation pressures currently seen.  There will be volatility seen as he speaks and further insight is provided.

  • ECB’s Draghi Speaks
  • US Bank Holiday

Tuesday 

Inflation comes back into focus as the UK release their yearly figures, with the main gauge expected to increase slightly to 0.3%.  As inflation figure are under the microscope this will be watched with interest to see if it does gain further and close the gap on the target 2% of the BoE. 

  • UK CPI y/y
  • Core CPI y/y
  • German ZEW Economic Sentiment

Wednesday 

The UK is again in the spotlight as the average earning figure is posted.  Alongside the recent unemployment figure, the earnings is one of the gauges which the BoE are also watching, in its assessment of when a rate rise could be seen. Focus then switches to the US where the FOMC minutes are released.

  • UK Average Earnings
  • US PPI m/m
  • US FOMC Minutes

Thursday 

China in the early hours post their CPI yearly figure and will be taken note of as the concerns of the world’s second largest economy continues to dominate markets.  From the US the weekly unemployment claims is released and the Philly Fed manufacturing index is posted.

  • China CPI y/y
  • US Philly Fed manufacturing Index
  • US Unemployment claims

Friday 

We end the week with the release of the UK retail sales where expectations are for the monthly reading to increase from -1.0% to 0.8%.

  • UK Retail Sales
  • UK Public Sector Net Borrowing
  • US CPI m/m