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The Market Last Week

Global equity markets ended mixed last week. UK markets painted a positive picture last week, amid gains in retail sector stocks as UK’s monthly retail sales rebounded in June. European markets ended in negative territory last week, as the common currency strengthened against its major peers reaching a 23-month high. On the data front, Eurozone’s economic sentiment index eased in July from June. Additionally, Germany’s economic sentiment index declined more than market expectations in July, marking its weakest level in 4 months. Moreover, the current situation index surprisingly dropped in the same month. US markets finished mostly higher for the week, driven by buoyant earnings and gains in technology sector stocks. On the macro front, US housing starts rebounded more-than-expected on a monthly basis in June, notching its highest level since February. Moreover, building permits bounced back into positive territory on a monthly basis in the same month, notching its strongest rise in 4 months. Furthermore, initial jobless claims dropped more-than-expected for the week ended 14 July 2017. Asian markets ended mostly higher in the previous week. In economic news, China’s GDP advanced more than market forecast on an annual basis in 2Q17. Meanwhile, Japan’s merchandise trade balance swung to a surplus in June compared to a trade deficit recorded in the previous month.

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Currency Update

The Euro ended the week on a stronger footing against the greenback, after the ECB President, Mario Draghi, welcomed a “robust” economic recovery in the Eurozone and added that senior officials will mull potential changes to the bank's bond-buying scheme before the end of the year. On the data front, Eurozone’s consumer price inflation advanced at par with the market forecast on a yearly basis in June. Further, current account surplus widened more-than-expected in May. The GBP ended weaker against the USD after data revealed that UK’s consumer price inflation rose less than market forecast in June, diminishing prospects of an early interest rate hike by the Bank of England. The USD ended on a bearish note against its major peers, amid mounting concerns over political developments in the US.

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ECB stood pat on interest rates, hints at scaling back monetary policy in autumn…

The ECB kept its key refinancing rate and asset purchases program unchanged, as traders speculated that the central bank would start scaling back its ultra-loose monetary policy. Even though ECB President, Mario Draghi, sounded optimistic on Eurozone’s economic growth, he urged patience as the robust growth was not yet translating into higher consumer prices. Moreover, he indicated that the ECB policymakers will discuss potential changes to the bank's bond-buying scheme at its September meeting.

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The Week Ahead

Going ahead this week, traders will keep a close watch on the FOMC interest rate decision, US gross domestic product (GDP), consumer confidence and flash durable goods orders data along with UK’s GDP report. Further, Germany’s consumer price index (CPI) and Japan’s unemployment rate & CPI will be on investors’ radar.

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