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Financial market review – 29 July 2016

Monday 25 July 

  • Germany’s IFO survey was in line with last week’s PMI’s and showed a similar level of post-Brexit resilience. The headline reading of 108.3 was down 0.4pts from June (vs. 107.5 expected).
  • The latest CBI business optimism reading in the UK showed that the July print tumbled 42pts to -47 (vs. -15 expected) and therefore the lowest reading since January 2009 (when it fell to -64).
  • In the US, the Dallas Fed manufacturing survey rose 17pts to -1.3 (vs. -10.0 expected) the highest level since December 2014. New orders, production and employment components all rose encouragingly. The two main US economic surprise indices are now back to the highest level since December 2014 following a huge spike in positive data surprises this month.

Tuesday 26 July

  • In the US the flash services PMI was a little disappointing after printing at 50.9 (vs. 52.0 expected), down 0.5pts from June. Together with the manufacturing reading last Friday, the composite for July nudged up 0.3pts to 51.5. Elsewhere consumer confidence edged down 0.1pts this month to 97.3 (vs. 96.0 expected).
  • US new home sales rose +3.5% MoM in June (vs. +1.6% expected) to an annualised rate of 592k. The Richmond Fed manufacturing survey rose 20pts to +10 (vs. -5 expected).

Wednesday 27 July

  • The Federal Reserve has kept interest rates unchanged at 0.5% following its July FOMC meeting.
  • In the US, the headline durable goods orders in June were weaker than expected at -4.0% MoM (vs. -1.4% expected) which is the biggest fall since August 2014, weighed down primarily by a big decline for aircraft and parts. As a result of all that the Atlanta Fed trimmed their Q2 GDP forecast to 2.3% from 2.4%.
  • In Europe both Germany (-0.1pts to 10.0; 9.9 expected) and France (-1pt to 96; 96 expected) consumer confidence readings for August and July remained resilient post Brexit.
  • UK Q2 GDP printed slightly above market +0.6% QoQ (vs. +0.5% expected) which had the effect of lifting the YoY rate by two-tenths to +2.2% YoY which is the highest since Q2 last year.
  • The ECB released its M3 money supply growth data which showed the growth rate as rising one-tenth to +5.0% YoY.

Thursday 28 July

  • In the US initial jobless claims ticked up 14k last week to 266k, although the four-week average continues to hover around a relatively lowly 256k. Meanwhile the Kansas City Fed’s manufacturing survey was a little disappointing with the print falling 8pts to -6 (vs. +2 expected).
  • In Europe, Germany reported CPI a little higher than expected in July (+0.3% MoM vs. +0.2% expected), which helped to nudge the YoY rate up one-tenth to +0.4%.
  • Euro area confidence indicators were resilient in July post Brexit. The headline economic confidence indicator rose 0.2pts to 104.6 (vs. 103.5) while indicators for business climate, industrial and services sectors all improved relative to June.

Friday 29 July

  • Bank of Japan decided to keep its base interest rate on hold at -0.1% and its quantitative easing programme unchanged at JPY 80 trillion a month, leaving the investors disappointed on its effort to boost the economy.
  • In Europe, the July CPI came in at 0.20% YoY which was marginally higher than the expected rise in price level of 0.1%. Meanwhile the Europe area GDP gained by 1.6% YoY, beating the expectation of 1.5%.
  • The US Q2 GDP showed a lower than expected growth of 1.2%, compares to 2.6% expected, whilst Canadian GDP showed a 0.6% contraction MoM in May, this is worse than the expected rate of -0.4%.
IndexActual priceWeek to dateMonth to dateYear to date
S&P 5002168.8-0.33.36.1
Eurostoxx 600341.10.23.4-6.8
Nikkei16569.3-0.36.4-12.9
MSCI Emerging Markets875.50.75.010.2
FTSE 1006714.28-0.243.237.56
Treasury yield 10 years1.49-0.080.02-0.78
Bund yield 10 years-0.10-0.070.03-0.73
Gilt yield 10 years0.71-0.09-0.15-1.25
USD vs Sterling1.3190.60-0.92-10.50
Sterling vs Euro0.847-1.10-1.44-12.94
USD vs Emerging Markets FX68.037-0.27-0.763.66
Commodity Index178.8-2.2-7.11.5
Gold1343.21.51.626.6
Brent Oil41.9-8.3-15.712.4

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