Despite all the extreme action, the dollar ended the week little changed. Euro-Zone German ZEW Economic Sentiment, US PPI, US Philly Fed Manufacturing Index and US Unemployment Claims are the upcoming featured events this week. Here is an outlook on the main market-movers.
Last week Italy became the main player in the EU debt crisis scene, overshadowing Greece’s problems of finding a replacement to the newly resigned Prime Minister George Papandreou and struggling to agree on the EU bailout terms. Italy, the third largest member of the EU, is on the verge of bankruptcy, something the EU cannot afford. The tentative resignation of Prime Minister Silvio Berlusconi did not stop the dangerous collapse in market confidence, causing Italian borrowing costs to reach a breaking point, hitting 7.5%. Will this escalation threaten EU existence?
- Japan preliminary GDP: Sunday, 23:50. Gross domestic product decreased less than forecasted by 0.3% in the second quarter, despite the strong yen and the March 11 earthquake. Analysts predicted a 0.6% drop. The GDP contracted 0.9% in the first quarter. A growth rate of 1.5% is expected now.
- UK inflation data: Tuesday, 9:30. UK inflation jumped to 5.2% in September amid a rise in gas and electricity bill. Analysts predicted CPI to reach 4.9% after the 4.5% figure registered in August. This is the highest reading since June 1991, badly affecting consumer consumption. Nevertheless the BOE expects inflation will drop sharply within the next year. For the month of October, only a small slide to a pace of 5.1% is expected now.
- Euro-Zone German ZEW Economic Sentiment: Tuesday, 10:00. German economic sentiment plunged further 5 points from September to -48.3 amid the grim outlook of the Euro-zone debt crisis. Economists expected a smaller drop to -44.8. Another drop to -51.7 is on the cards at the moment. Note that this is usually one of the more pessimistic figures.
- US retail sales: Tuesday, 13:30.U.S. retail sales climbed better than anticipated in September with 1.1% rise in Retail sales and 0.6% increase in Core retail sales indicating consumer spending is improving and recovery is marching forward. The previous readings in August registered 0.3% climb in retail sales and 0.5% increase in Core sales. Economists expected retail sales to increase by 0.5% and Core sales by 0.2%. Similar numbers are likely now: sales are predicted to rise by 0.3% and core sales by 0.2%.
- US PPI: Tuesday, 13:30. US producer prices leaped forward rising 0.8% in September, well above the 0.2% increase anticipated, while Core PPI increased by 0.2% after adding 0.1% in August. The increase in prices was led by gasoline 4.2% appreciation and 0.6% increase in food prices. The strong climb may indicate rising inflation. A modest drop of 0.1% is expected in PPI, and a rise of 0.2% is likely in Core PPI.
- Japan rate decision: Wednesday. The Bank of Japan decided to increase its asset-purchase program by Y5 trillion in its October board meeting, amid an unexpected surge in the yen against major currencies endangering the nation’s recovery. The interest rate was unchanged in a range of 0.0%-0.1%.
- UK Claimant Count Change: Wednesday, 9:30. A surprisingly low number of people claimed unemployment benefits in September with claimant count reaching 17,500 while economists expected a higher figure of 24,700. The previous reading stood at 19,100 claims. However the rate of unemployment increased to 8.1% in August from 7.9% in July. A rise of around 20,800 jobless claims is expected for October, and the unemployment rate for September will likely edge up to 8.2%.
- US inflation data: Wednesday, 9:30. The U.S inflation increased by 0.3% in September while Core CPI, without food and energy, rose by 0.1%. The main reason for the increase is an appreciation of 2.0% in energy prices. Higher inflation will reduce the chances of further action from the Fed No change is expected in CPI, while Core CPI is estimated to have risen by 0.1%.
- US TIC Long-Term Purchases: Wednesday, 14:00. Overseas purchases of long-dated securities surged in August reaching 57.9 billion after a revised $9.1 billion in July. The flood of investments occurred despite theUS credit rating drop due to worries from global market turmoil. A similar flow is due now: 63.4 billion.
- US Building Permits: Thursday, 13:30. New building permits dropped 5.0% to 594,000 units in September while economists expected a larger figure of 610,000 units. A small rise to 0.60 million is expected now. The US is still unwinding the real estate bubble.
- US Unemployment Claims: Thursday, 13:30. This weekly gauge of unemployment continues improving. In the past week it dipped lower, to 390K, continuing the slow trend. A setback is predicted now, with a rise to 397K. A stabilization under 400K will help the US.
- US Philly Fed Manufacturing Index: Thursday, 15:00. Manufacturing in the Philadelphia region climbed unexpectedly in October rising to 8.7 following a negative17.5 in September. This is the first positive sign in three months indicating recovery. Economists expected another negative figure of -9.0. This positive reading helps remove worries about a second recession in the US market. A similar score of 9.3 points is expected now.
*All times are GMT.