This week kicked off with a bang in Asia and it will close with a bang in Greece.

On Monday, the mainland stock market in China plunged 7.70 percent. At one point, the stock market futures in China had tumbled 10 percent, the one day limit for stock prices to move in China. The slide in shares was sparked by a three-month ban on new margin accounts at three large brokerage firms due to regulatory violations.

China’s rally in 2014 was fueled by growing leverage and with the limitations, demand for shares slumped. Many A-shares of Chinese financial companies fell by the 10 percent limit on Monday, but in no-limit Hong Kong, the H-shares of the same firms lost another 5 to 10 percent. Chinese ETFs that hold H-shares, such as iShares FTSE/Xinhua China 25 (FXI), will likely open lower on Tuesday if a rebound does not occur overnight.

European stocks ignored the drop in China as investors are focused on the European Central Bank’s (ECB) Thursday meeting. According to a Bloomberg survey of economists, 93 percent of respondents believe the ECB will announce a 550 billion euro quantitative easing (QE) program. Rumors of the plan surfaced after a meeting between ECB President Mario Draghi and German Chancellor Angela Merkel on Wednesday last week. The latest rumored details say the program will be carried out by national central banks purchasing their own securities, to make it more palatable to opponents such as Germany.

Whatever the result, Thursday and Friday could be big days in the currency market. Speculators and investors have largely priced in QE by selling the euro ahead of the meeting. Simply meeting their expectations may be enough to spark a short-term rally in the euro as traders close their positions.

Europe won’t rest following the ECB meeting. On Sunday, Greece elects a new parliament. The anti-austerity Syriza party has held its narrow lead in the polls event though the race has tightened.

In the United States, stocks are on a holiday shortened week due to Martin Luther King Day. Nevertheless, it will be an eventful week of earnings reports. International Business Machines (IBM), Baker Hughes (BHI), Halliburton (HAL), Netflix (NFLX), Ebay (EBAY), Starbucks (SBUX), McDonald’s (MCD), General Electric (GE), Verizon (VZ), Delta (DAL), Johnson & Johnson (JNJ), Morgan Stanley (MS), American Express (AXP), Sandisk (SNDK), UnitedHealth Group (UNH) and Intuitive Surgical (ISRG) headline the week.

As for economic data, the homebuilder’s index on Tuesday and housing starts on Wednesday could impact home builders. SPDR Homebuilders (XHB) and iShares U.S. Home Construction (ITB) have been rallying in recent weeks, helped in part by lower long-term interest rates. The sector stumbled last week on a weak earnings report from KB Homes (KBH) and these reports could impact the sector. On Thursday, the flash purchasing managers’ index for January will be released. Overseas, the flash PMIs for other economies will also be out. China’s fourth-quarter GDP growth rate will be announced along with industrial production; weak numbers there could send commodities such as copper to new 52-week lows.

All in all, it is set to be a very eventful week. There may be new questions on Monday of next week, such as how the eurozone will proceed if Greece demands to renegotiate the bailout conditions, but at least the field of uncertainty will be narrowed, and attention will shift back to the improving domestic economy.

This week proved to be a historic week for the financial markets. Since 2008, nearly every nation has been trying to devalue their currency. The Swiss resisted for a time, but after repeated troubles with eurozone sovereign debt, the Swiss National Bank (SNB) feared safe haven buying of the Swiss franc would lead to an overvalued currency versus the euro. Since 2011, the Swiss franc was pegged to the euro at a rate of 1.20 francs to 1 euro.

On Thursday, the Swiss reversed course. The immediate response was a massive move of more than 30 percent in the Swiss franc versus the euro, before settling down to a gain of about 17 percent and a roughly 1 to 1 exchange rate. The large move came in part because many speculators were using the Swiss franc to fund carry trades. Since the Swiss franc has negative interest rates (the Swiss National Bank cut interest rates to negative 0.75 percent on Thursday) and it was depreciating along with the euro, many currency traders shorted the franc and used the proceeds to bet on other currencies.

Thursday’s decision by the SNB to ditch the peg caused these trades to blow up. Two currency brokers have also collapsed; one listed in the U.S. was FXCM Inc. (FXCM), which saw its shares drop 88 percent from Wednesday’s close after the firm said it can no longer meet regulatory requirements. Another firm in New Zealand said it will shut down as a result of losses on Thursday. Several other brokers are also reporting losses, including Deutsche Bank (DB), Barclays and Interactive Brokers (IBKR). These losses won’t break the firms, but it weighed on the financial sector on Friday.

The currency market wasn’t the only one to see a shock. Only one day earlier, Chinese hedge funds dumped copper at the open in China and sent that metal down nearly 20 cents a pound. It was the largest one day loss in copper since 2009, amid the financial crisis.

For all the action in the commodity and currency markets, the stock market was remarkably calm. Stocks drifted lower this week, with the S&P 500 Index down about 2.5 percent heading into Friday trading, a healthy dip for a single week, but nothing out of the ordinary. Healthcare and consumer staples are still up for the year and utilities and real estate are rallying on the back of lower interest rates. Dividend shares are outperforming. An even better sign for the market is the strength in small and mid cap stocks. The latter are leading the market right now, and until Thursday’s drop, small caps were leading large caps. This shows the underlying bullish sentiment in the market.

Earnings reports didn’t provide any help for stocks this week either. Intel (INTC) beat its earnings estimates, but then delivered weak guidance on margins. Citigroup (C), J.P. Morgan (JPM) and Bank of America (BAC) also fell following their reports.

Economic data released this week was positive, but unfortunately, it was overshadowed by other events. Retail sales in December were down, but a big chunk of the drop in sales was due to falling gasoline prices. Adjusted for the drop in prices, gasoline consumption likely increased, which means economic activity increased. It’ll take some time for that activity to show up in the data, but cheaper energy will be a positive factor for economic growth in 2015. Based on previous drops in oil prices of similar size, growth in 2015 should exceed estimates in much of the developed world.

Nevertheless, investors may need another week before they focus on long-term factors. Losses from the move in the franc will be a big story over the weekend. Next week the European Central Bank meets to decide whether it launches a quantitative easing policy, and a few days later, Greece votes. These events may create volatility in the markets over the short-term but ultimately, the positive long-term trends will guide stocks higher.

An ETF For European QE

A Seeking Alpha Contribution

 Back in December, ECB President Mario Draghi said consensus wasn’t needed for a QE program. The stumbling block in Europe has been several hard money nations led by Germany. These are the countries often lumped together as part of a northern euro block, such as Holland, Austria and Finland, who prefer a strong euro to a weak one. On the other side are the Greeks, Italians, Spanish and French who would do better with a weaker euro. Global investors are giving the south of Europe its wish by selling the euro, but a QE program would be a big help to nations struggling with unsustainable sovereign debts. If a QE program is launched, it will be good news for European equities, and due to the need to overcome German-led opposition, may benefit the north much more than expected…. To Continue Reading, Please Click Here.