Hey folks, get my take and the current markets.
WEEKLY SOUND BITES:
Major indexes gave back a portion of the previous week’s strong gains after St Louis Fed President James Bullard, a prominent “hawkish” Federal Reserve policymaker, appeared to dampen hopes that inflationary pressures had peaked. He indicated that the idea inflation has peaked is not statistically really in the data at this point,” while also stating he was likely to vote in favor of another 75-bps increase in rates at the Fed’s next policy meeting in Sept…the release of the Fed’s minutes from its July policy meeting contained few surprises…Since the 2000-2002 bear market, roughly half of the S&P 500’s best days have taken place during a bear, and about one-third of the best days happened at the very beginning of a new bull market. And anytime the market is up or down more than 3%, it is almost always during a bear market.
Retail sales proved more resilient than expected in July, rising 0.7% once the volatile gas and auto segments were excluded. Notably, sales rose solidly on an inflation-adjusted basis given the smaller 0.3% increase in core (less food and energy) inflation. Industrial production was also strong, rising 0.6% in the month, roughly twice consensus expectations. Weekly jobless claims ticked lower, betraying expectations for an increase. On the downside, housing data remained weak, and Target reported a sharp decline in earnings as shoppers continued to pull back on discretionary purchases.
Along with a generally dovish interpretation of the Fed’s July meeting minutes, the strong economic data appeared to fuel an increase in longer-term bond yields, with the yield on the benchmark 10-year note nearing 3.0% for the first time since July 21.
Across the pond, in the UK we see that headline inflation rate hit 10.1% in July—the first double-digit reading since February 1982—fueled by sharply higher food costs. The year-over-year increase in consumer prices exceeded a consensus forecast of 9.8% in a FactSet survey of economists. Factoring in inflation, regular wages declined 3.0%—the fastest drop since comparable records began in 2001. Unemployment rose 0.1 percentage point to 3.8% in the same period. Meanwhile, Eurozone inflation hit a record 8.9% in July. Meanwhile, Eurostat lowered its estimate of second-quarter economic growth to 0.6% from 0.7%. Factory-gate prices in Germany rose 37.2% in July from a year earlier, driven by strong increases in natural gas and electricity costs.
Japan’s GDP expanded by an annualized 2.2% in the second quarter of 2022, according to the Cabinet Office’s preliminary reading, released on Monday. This missed consensus expectations of around 2.5% growth, however. Industrial production increased by a seasonally adjusted 9.2% in June, bettering initial expectations of 8.9%. Inflation in Japan continued to remain above the 2% target, influenced by higher fuel prices and a weaker yen, official data showed on Friday. Excluding fresh food, core inflation increased to 2.4%, from 2.2% the previous month.
China’s stock markets posted a loss for the week in reaction to weak economic data and elevated levels of COVID cases, with drought conditions in parts of the country adding to the gloom. Retail sales in July grew 2.7% year on year while industrial output was 3.8% higher than a year ago. Both data sets were below expectations. In the property sector, data showed China’s home prices fell for an 11th month in July. New home prices in 70 cities declined 0.11% from June, when they fell 0.1%, according to the National Bureau of Statistics. Existing-home prices fell 0.21%, the same as a month earlier. It was the worst seven-day period for China in terms of COVID infections since mid-May, with more than 18,000 new local cases recorded, Bloomberg reported.
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