Investors could face a more volatile market this week if the weaker market sentiment from last week extend further. US equities closed lower last Friday as the US GDP showed a slower growth rate at 3.5% even though it is higher than forecasted. Safe haven assets such as gold and the Japanese Yen strengthened, suggesting a risk-aversion attitude. The stimulation from US corporate earnings reports might not be sufficient to boost investor buying. However, more economic data from around the globe will be unveiled throughout the week that could lift investor confidence if global growth uncertainty is eased. The action includes a series of GDP data and inflation readings from the EU region and Australia. Followed by global PMIs from China, Britain, and countries with the EU. The end note might be a higher focus on the US Non-Farm Payroll as analysts look for higher growth after previous hurricane disruption.
Other highlights in this week include the Bank of Japan (BOJ) and Bank of England (BOE) interest rate announcement. The decision of both BOJ and BOE may provide little surprise in terms of interest rate increase. Nonetheless, a higher scrutiny will be placed on the inflation report or budget statement. Any content related to the economic outlook, labour market, or interest rate prospect could spark higher volatility in regional currencies. In particular, the British Pound could have a chance to shake off its recent weakness if investors derived optimism from these reports.
Notably, the US 10 year bond yield fell sharply last week from the peak of around 3.20% to now at 3.076%. The decline in bond yields could relieve investors from the pressure of a higher borrowing cost. The disagreement in buy and sell, panic and optimism, could be resolved through a higher volatility. In particular, the price movement in growth and higher valued stocks could reflect investor’s thinking in the short run.