Hey Everyone, I hope you are all having a good weekend. This upcoming week promises to be a very interesting one for market price movement. In addition to a very strong Q2 Earnings Calendar, we will get the FED Interest Rate decision and our first look at Q2 GDP…all of which can really move the markets a good deal. Get my take below in this week’s round-up.
WEEKLY SOUND BITES:
Major indexes finished higher on the week as momentum from late last week as investors welcomed signs of a slowing economy and fading inflationary pressures while negative sentiment had reached extreme and unsustainable levels. Markets also absorbed a number of Q2 earnings reports, many of which indicated a slowing economy but also some greater resilience in corporate profits and outlooks than many had expected.
Weekly jobless claims, reported Thursday, came in above expectations and hit their highest level (251,000) in nine months. A gauge of manufacturing in the mid-Atlantic region fell to its lowest level since early in the pandemic, and the S&P Global Composite Index for July fell into contraction territory for the first time in nearly two years, dragged lower by a sharp decline in service sector activity. Housing data generally disappointed, with housing starts and existing home sales missing consensus expectations.
Weak economic data briefly pushed the yield on the benchmark 10-year U.S. Treasury note down to 2.73% on Friday morning, its lowest level in nearly two months. And the Fed Fun futures is pricing in a year-end rate of 3.5 – 3.75%. with the Feds being forced to begin reducing rates in mid-2023.
The ECB raised interest rates by 50 basis points as part of its efforts to curtail rising inflation. This larger-than-expected adjustment was combined with the announcement of a new bond-buying tool called the Transmission Protection Instrument, which was introduced as a measure against the surge in borrowing costs. Manufacturing PMI fell to 49.6 in June, from 52.1 in May. The services sector PMI fell to 50.6 from 53, likely reflecting diminished consumer confidence as the cost of living continued to increase. Meanwhile, in the U.K. consumer price inflation reached a new 40-year high of 9.4% year on year in June—up from 9.1% in May. Russia restarted Nord Stream gas flows to Europe following its closure for a 10-day maintenance period, but shipments remained at approximately 30% of previous capacity.
At its July monetary policy meeting, the BoJ left its short-term policy interest rate unchanged at -0.1%, while maintaining its long-term yield target and asset purchase program, with a view to achieving its inflation target of 2%. They also downgraded its forecast for economic growth, to 2.4% year on year (y/y) in fiscal 2022 from an earlier 2.9% just a few months ago.
China issued a growth target of about 5.5% for 2022 at a Politburo meeting in April, but many economists believe that Beijing will have a hard time meeting its goal. The People’s Bank of China maintained interest rates as expected, keeping the one-year loan prime rate (LPR) unchanged at 3.70%.
Enjoy this week’s round-up;
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