Good morning. Equity markets finished last week on a positive note with the major bourses shrugging off political tensions in the Middle East. With the G20 meeting in Paris on Friday, and violent protests in Bahrain and Libya, the markets opened cautiously before support from the corporate sector drove gains. The G20 summit signalled a turning point for the world economy, with monetary and fiscal policy debate fuelling economic instability in the 2nd world and emerging market economies. China’s recent rate rise in light of inflationary pressures highlighted this point. The US at the summit also noted the importance for a shift in the Chinese Yuan in the coming 12 months, to ensure that global economy would not suffer. Monday will see the US equity markets closed for Presidents Day. Economic news that will be released this week includes Consumer Confidence (market expects 67) on Tuesday, Existing Home Sales (market expects 5.23 million) on Wednesday, Initial Claims (market expects 410,000), Durable Orders (market expects 3%), New Home Sales (market expects 310,000) on Thursday and GDP (market expects 3.3%) on Friday. The GDP deflator figure is forecast to touch 0.3% for Q4.
On the equity market front, the Dow Jones closed 73 points higher last Friday. With the US market closed on Monday, traders will eye key earnings from retailer Wal-Mart on tuesday. The market is looking for a strong fourth quarter from the company. Other large caps reporting earnings during the session include Home Depot, Macys and Hewlett Packard.
On the currency front, the greenback rallied against the Swiss franc on Friday with the currency pair touching 0.9527. Tensions in the middle east had little impact on the movements, with traders watching the G20 meeting closely. Overnight CPI data in the US also supported the dollar, with economists forecasting the possibility of a rebound in interest rates in the coming 12 months. Swiss Central Bank comments recently have given rise to the possibility for fiscal and monetary changes. Cautious about the G20 meeting, traders pushed the Euro lower on Friday. Trading at 1.3579, the currency reacted to news that European banks were reliant on ECB lending overnight. Estimated figure of 16 billion was lent during the session, with economists concerned at the amount. This figure translates into one of the largest borrowing amounts in the last 3 years. Initially reacting to the report, the Euro tracked a consistent trend before weakening at lunch.