Concerns over the slowdown in the Chinese economy dominated the global markets this week. The Chinese manufacturing and services purchasing managers' indexes fell in December, while China's central bank devaluated the yuan. All that led to market turbulences this week. The global markets seemed to stabilise today as the China Securities Regulatory Commission announced on Thursday that it suspended circuit-breaker rules. The circuit-breaker rules intended to stop free-falling share prices and to calm markets.
The euro came under pressure this week on comments by the European Central Bank's (ECB) President Mario Draghi. He said at a press conference on Thursday that the value of the ECB's asset-buying programme will be discussed at the monetary policy meeting in December. He pointed out that the central bank will expand its asset-buying programme if needed to boost inflation toward the 2% target.
The U.S. economic data showed this week that it is unlikely that the Fed will start raising its interest rates this year. Inflationary pressures remain at very low level. Only U.S. consumer price index excluding food and energy rose to 1.9% in September from 1.8% in August. It is unclear if this inflation data will be enough for the Fed's interest rate hike. Fed Governors Lael Brainard and Daniel Tarullo said this week that they would like to see clear signals that the inflation was accelerating toward the 2% target.
The uncertainty about the interest rate hike by the Fed this year remained. Yesterday's minutes of the latest Fed's meeting did not produce any clarity on the Fed's monetary policy. The Fed said that it wanted to have more time to see if the slowdown in the global economy will have a negative effect on the U.S. economy. FOMC members noted that the U.S. labour market continued to improve, while the inflation remained at low levels.
There is still no progress in the debt talks between Greece and its creditors, and the likelihood for a Greek default rises. The Greek government provided a new proposal this week, but its creditors said that the proposal is insufficient. The culmination of the debt talks was yesterday as the International Monetary Fund (IMF) technical team has left the debt talks in Brussels, saying there were "major differences".
Markets were volatile this week due to speculation on when the Fed starts to raise its interest rate and due to concerns over the Greek debt crisis. It seems as debt talks between Greece and its creditors will never end. Athens says that there is a progress in debt talks, EU officials denied it.
The Greek debt talks have become something of a never-ending story. Greece and its creditors (the European Union and the International Monetary Fund) are unable to reach a deal on the economic reforms needed to unlock a new tranche of loans (€7.2 billion). Debt talks took several months but a deal is not signed yet. The Greek government made some concessions but it is not enough.
Greece yesterday submitted a request for an extension of its existing loan agreement. But German Finance Minister Wolfgang Schaeuble replied that the Greek loan proposal was "not a substantial proposal for a solution".
Another round of talks between Greece and the European Union was scheduled to take place today.
If both sides do not sign an agreement, it could mean that Greece will leave the Eurozone.
Eurozone's finance ministers meeting has ended without an agreement on extending the Greece's bailout on late Wednesday. The next meeting is scheduled to be on Monday.
The tone was friendlier after a summit of European Union leaders in Brussels on Thursday. Greece's Prime Minister Alexis Tsipras said the EU leaders covered an important part.
Since its low on October 16th the DAX is in rally mode again. The intraday low at 8350 points was the start for a new climb towards its all-time high currently at 10,987 points in the DAX-future, only short 13 points of the magic 11,000 level. Bullish momentum slowed in the last couple of days but the bullish trend is still intact. The situation is comparable to the one we saw at the end of January.
- U.S. commercial crude oil inventories decreased by 2.5 million barrels from the previous week
- Canada: Retail Sales, m/m, November 0.2% (forecast 0.5%)
- U.S.: Nonfarm Payrolls, January 227 (forecast 175)
- Eurozone: Consumer Confidence, January -4.9