REPORT
By Övünç Kutlu
U.S. letter, week beginning Jan. 2

What happened last week?

The most important development last week was the U.S.’ application of wide-ranging penalties on Russia for its alleged role in hacking this year's presidential race.

A set of sanctions targeted nine entities and individuals, including Russia’s main intelligence directorate, the GRU, and its Federal Security Service, the FSB, as well as four top GRU officials, including its chief Lt. Gen. Igor Valentinovich Korobov. 

President Barack Obama said in a statement the move follows "repeated private and public warnings" to Russia, "and are a necessary and appropriate response to efforts to harm U.S. interests in violation of established international norms of behavior.

"All Americans should be alarmed by Russia’s actions," he said, likely referring to his forthcoming successor, Donald Trump, who has cast doubt on the U.S. intelligence community's findings that Russia is culpable for a series of hacks targeting the Democratic Party and its presidential nominee in the race, Hillary Clinton.

The Obama administration publicly announced in October it had assessed that Russia was responsible for the attacks, and later said the hacking could have only been directed by the highest levels of the Russian government.

For its part, Moscow has adamantly denied the charges.

In addition to the black listings, the State Department is expelling 35 Russian officials and shuttering two Russian compounds in Maryland and New York, which were being "used by Russian personnel for intelligence-related purposes", Obama said.

Obama said the 35 officials being expelled are "intelligence operatives". The officials and their families were given 72 hours to leave the U.S.

Due to Christmas and New Year celebrations, it was a calm week for macroeconomic data.

The Consumer Confidence Index rose 4.3 points to 113.7 in December, from the previous month, marking its highest level since August 2011, according to the Conference Board on Tuesday.

After the announcement of consumer confidence, President-elect Donald Trump thanked himself. “The U.S. Consumer Confidence Index for December surged nearly four points to 113.7, THE HIGHEST LEVEL IN MORE THAN 15 YEARS! Thanks Donald!” he wrote in his Twitter account.

Initial jobless claims fell to 265,000 last week, in line with market expectations. The data for the previous week was not revised and remained unchanged at 275,000 – the highest level since June.

Goods Trade Balance rose by 5.5 percent from the previous month to reach $65.3 billion in November. The market expectation for the data was $61.6 billion.

The U.S. stock market closed the last week of 2016 with losses, but indexes posted gains between 10 to 16 percent overall during the year. Between Jan.4 and Dec. 28, the Dow Jones Industrial Index gained 15.6 percent, the S&P 500 rose 11.8 percent, and the Nasdaq increased 10.9 percent.

 

What to expect from this week?

The market and investors will closely watch nonfarm payrolls and the unemployment rate for December this Friday.

Nonfarm payrolls rose 178,000 in November, and is now expected to increase by 175,000 in December.

The unemployment rate, which was 4.6 percent in November, is expected to be 4.7 percent in December, according to the market consensus.

The U.S. Federal Reserve Chicago President Charles Evans, Richmond President Jeffrey Lacker, and Dallas President Robert Kaplan are expected to make speeches on Friday. The market and investors will try to look for clues in the Fed officials’ statement about the outlook of the American economy and when the Fed would make a rate rise this year.

The Fed increased its benchmark interest rate by 25 basis points on Dec. 16, and stated that it now expects three rate hikes during 2017, instead of its previous projection of two.

Minutes from the Fed’s December meeting will be released on Wednesday. Investors will be able to take a closer look at the dynamics behind the Federal Open Market Committee members’ decision last month.

The U.S. stock market was closed on Monday due to the New Year’s holiday. Wall Street will begin the first trading day of 2017 on Tuesday.

 

03 Jan,2017

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