03.01.14 Friday Morning

As the trading week comes to a close, we are finally returning to normality with volumes slowly moving back to levels seen before Christmas and New Year celebrations. With New Year’s Day closing markets for the second time in as many weeks, people seized the opportunity to recap on the year and plan for the 12 months ahead.

After the FTSE 100 achieved its biggest yearly gain since 2009, with an impressive 14% increase, bulls will be hoping for much of the same in 2014. Early analysts have boldly predicted that the index will breach 7,000 by some distance, citing the 13-year high achieved in 2013 as a significant factor. Whilst the year’s high of 6,875 could prove to be a resilient resistance level, analysts predict it will only act as a temporary impediment.

With the U.S. Federal Reserve set to scale back its massive monetary easing programme in January, investors are focusing on the underlying U.S. economic recovery and the central bank's commitment to keep interest rates low for longer. The S&P 500 surged 30 percent in 2013, finishing the year at an all-time high for the first time since 1999. The Dow average climbed 27 percent in 2013 for its best performance since 1995.

Global equities soared by $9.6 trillion in 2013 as central-bank bond buying helped the U.S. economy gain momentum, while the euro area emerged from recession. European stocks rallied 17 percent in 2013. Their biggest increase since 2009 sent the Stoxx Europe 600 Index to 15.4 times its constituents’ projected earnings, up from 12.7 times at the beginning of 2013.

2014 however has got off to a less than inspiring start after global headline indices returned gains gathered over the last week or so. Along with European shares, U.S equities declined on January 2nd for the first time since 2008. Yesterday’s decline on the S&P 500 snapped a streak of five straight gains on the first trading session of January.

Obviously, the overall performance in January will bear more significance than the opening day or two. "As January goes, so goes the year", has been right for 62 of the last 85 years, or 73 percent of the time.

Ben Bernanke is due to speak tonight at 19:30 GMT, providing the outgoing Federal Reserve Chairman with a chance to put his tenure in perspective with a speech on the changing Federal Reserve’s past, present and future. Bernanke also will subject himself to audience questions.

Looking ahead to next week, Monday will see Federal Reserve policymakers meet to vote for their next head of Fed. Janet Yellen, who will become the first woman to chair the U.S. central bank, is due to take the reigns on February 1st. Yellen has been deeply involved in the decisions to press the Fed into uncharted monetary policy waters, as the Fed's vice chair since 2010 and before that as chief of the San Francisco Fed. As she steps into her new role, her biggest challenge will likely be to begin to pare back the Fed's crisis-era stimulus.

Stock of the Week: NEXT PLC

Next Plc, Britain's second-largest clothing retailer, raised its yearly profit outlook on the back of pre-Christmas sales that topped its own forecast, placing it firmly among the sector's winners in the festive trading season. Shares in the company, up 47 percent over the last year, rose another 11 percent to a record high after it said total sales rose 11.9 percent in the November 1 to December 24 period, helped by its policy of not offering price-cutting promotions before Christmas.

Next Week’s Notable Economic Events:

Monday –

• GBP – Services PMI @ 09:30
• USD – ISM Non-Manufacturing PMI @ 15:00
• USD – Fed Chairman Nomination Vote @ 22:30

Tuesday –

• AUD – Trade Balance @ 00:30
• CAD – Trade Balance @ 13:30
• USD – Trade Balance @ 13:30
• CAD – Ivey PMI @ 15:00

Wednesday –

• EUR – German Constitutional Court Ruling
• USD – ADP Non-Farm Employment Change
• USD – FOMC Meeting Minutes

Thursday –

• CNY – CPI y/y @ 01:30
• GBP – Asset Purchase Facility @ 12:00
• GBP – Official Bank Rate @ 12:00
• EUR – ECB Press Conference @ 13:30
• USD – Unemployment Claims @ 13:30

Friday –

• CNY – Trade Balance
• CAD – Employment Change @ 13:30
• USD – Non-Farm Employment Change @ 13:30
• USD – Unemployment Rate @ 13:30

Next Week’s Notable UK Earnings:

Wednesday – Robert Walters Trading Update for the quarter ended 31^st Dec 2013