The week would be highlighted by two meetings in Vienna, Austria. One would be OPEC (Organization of Petroleum Export Countries), where the oil cartel would once again attempt a production freeze on oil output. The other would be the ECB (European Central Bank) where it would be decided if the financial institution would expand stimulus in an attempt to recharge the slow growing EU(European Union) economy.
An OPEC output agreement on crude failed because Iran refused to agree to a new Saudi Arabian proposal. Production declines in Canada, Libya, Nigeria, and Venezuela were balanced by increases in output from the Middle East. Overall output for the organization, remains at 32.5 million barrels a day.
The OECD (Organization for Economic Cooperation and Economic Development) lowered its world growth forecast by 0.03% to 3% in 2016. Any lower and the global economy will be in recession. Next years forecast is 3.3%. The organization warns of further monetary loosening will do more harm than good. More countries are falling into the low growth trap.
Euro-zone inflation stayed negative last month moving up slightly to -0.01% from -0.02% from April. This figure is no where near the 2% goal set by the ECB. Unemployment in the area remained flat in April at 10.2%.
The big market news came on Friday, with the United States jobs report. Only 38,000 were created in May with unemployment dipping to 4.7%. The problem was 164,000 were expected. Real unemployment is at 9.8% and job participation dropped further to 62.6%. Result of 458,000 leaving the labor market. This is a new generational low. Futures immediately began to move down.
The dismal United States jobs report issued Friday, makes an interest rate hike by the United States Federal Reserve (Fed) more unlikely this year. The central bank can do little as the domestic economy moves ever closer to an official recession.
United States interest rates plunged Friday morning on news of the May jobs report going from 1.80% on the ten year note to 1.71%. The United States Dollar (USD) dropped in valuation as well.
In Europe, Greece announces that it cannot proceed with the extra measures sought in exchange for new bailout loans. Creditors were asking for more reforms in banking regulation, pensions, the sale of bad loans and privatization efforts. On Friday however, the Greek government did provide some additional moves in austerity to try to mollify creditors.
Most of the new loans provided to Greece is not going to help restructure the economy and pay down debt. It is instead being used on the Middle Eastern migrants that are swamping the country.
Europe and United States politicians are trying to rebuild support for TTIP (Transatlantic Trade and Investment Partnership). The treaty is coming under increasing attack.
Portugal is expecting GDP (Gross Domestic Product) to remain flat this year. Debt to GDP ratio is near 130%, among the highest in the Euro-zone. Policymakers there are urging investors to be patient as the government attempts to lower spending.
In Switzerland, voters will decide this weekend on whether residents in the country will be guaranteed a monthly income of 2,500 francs ($2,560.12 USD) regardless of employment status.
In Japan, Prime Minister Shinzo Abe announces the postponement of the national sales tax until 2019. The rate was supposed to be raised from 8% to 10%. The action is being taken in response to the ongoing stagnating Japanese economy. P.M. Abe will also provide a new stimulus package later this year.
The Japanese market reacted to the governmental action. Stocks fell by the most in a month and the yen strengthened further.
The delay in the national sales tax hike for more than two years, darkens the debt situation in Japan. The credit rating of the country could be downgraded as a result. Debt to GDP ratio in Japan continues to rise, now near 240%.
Chinese economic activity remains sluggish. Manufacturing stayed unchanged in May from the month before at 50.01. China’s service sector is slower dropping from 53.5 to 53.1. The Caixin manufacturing PMI index dipped to 49.2, the 15th consecutive monthly decline. There is growing doubt that China will be able to reverse its slowing economy.
Australia is experiencing than fastest expansion in more than three years. GDP expanded at 3.1% in the first quarter.
Iraq is increasing production of oil by 5 million barrels of extra crude in June, joining other Gulf States in attempting to raise market share ahead of the meeting of OPEC. Iran, Kuwait, Saudi Arabia, and the United Arab Emirates all plan to raise output in the third quarter of 2016.
In business news, the 40,000 Verizon workers on strike returned to work this week. This ends a more than six week work stoppage, one of the longest strikes in the United States in recent times.
Meanwhile in France, commuters are facing more travel interruptions, as rail workers go on strike this week. About 50% of the overall service has been shut down as a result.
Gold producers globally witnessed a major spike in stock valuations Friday morning, on the decline in USD. Precious metals prices all spiked over 2% on the news.
On Friday morning, American West Texas Intermediate (WTI) oil decreased -0.59% to $48.88 USD, prices are only $0.26 USD lower where they stood last week. International priced Brent is down by -0.62% at $49.73 USD. This is a $0.67 USD increase in valuation from the week before.
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