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WEEKLY ROUND-UP Thru July 8th 2022: Fork in the Road

Hey folks the markets look like they are attempting another bullish run into Q2 Earnings but we must be careful here. Get my take in this week’s round-up.


Major indexes finished higher on optimism that the Feds will be able to curb inflation without tipping the economy into a recession. The S&P Global and the ISM both released their final estimates of services activity in June, both of which came in modestly above consensus estimates but indicated a continuing slowdown in growth. The ISM’s measure hit its lowest level since June 2020, and its employment gauge fell into contraction territory for the third time this year, according to Reuters. The closely watched payrolls report showed employers added 372,000 nonfarm jobs in June, well above consensus expectations of around 270,000.

Moderating economic data may have prompted some investors to brush off the hawkish stance that the Federal Reserve reiterated in its June meeting minutes, which were released on Wednesday. The minutes also revealed that policymakers acknowledged that risks included the possibility that a further tightening in financial conditions would have a larger negative effect on economic activity than anticipated. By the end of the week, federal funds futures tracked by CME Group were pricing in a higher probability of a 75-bps rate hike at its upcoming policy meeting.

Shares in Europe advanced in the first week of July after three consecutive months of losses. The minutes of the ECB June meeting showed most members agreeing to a 25 bps increase to the deposit rate in July and leaning toward a 50 bps move in September. Meanwhile across the Eurozone, producer prices surged an annual 36.3% in May. Excluding energy, prices rose 16.0%. Meanwhile, retail sales volumes increased sequentially in May by a smaller-than-expected 0.2%. Sales volumes in April were revised higher to 1.4%. And over in the U.K., Boris “Bull Dog” Johnson announced his intention to resign after more than 50 ministers and several Cabinet members stepped down in protest at his handling of a series of scandals that have rocked his administration.

In Japan campaigning for the parliamentary upper house election on July 10 was suspended after Shinzo Abe, Japan’s former and longest-standing prime minister, was shot and killed while giving a campaign speech. The basic tenets of Abe’s signature economic policy, “Abenomics,” built on the three pillars of monetary easing, fiscal stimulus, and structural reforms, have largely been retained by current Prime Minister Fumio Kishida’s government

Meanwhile, Chinese stocks eased as rising coronavirus cases and elevated geopolitical tensions hurt sentiment. China’s Ministry of Finance is considering allowing local governments to sell the equivalent of USD 220 billion of special bonds in the second half of this year to boost infrastructure funding. The Caixin Services Purchasing Managers’ Index (PMI) for June surged to a better-than-expected 54.5 from 41.4 in May, the latest evidence that China’s economy is recovering from easing virus restrictions.

Enjoy this week’s Round-Up

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