Weekly Market Review - July 1-5
The week that ended July 5 has been quite passive, especially because of the US Independence Day on July 4.
One of the most important events occurred in Europe, where leaders nominated IMF Managing Director Christina Lagarde as president of the European Central Bank, which has been run by Mario Draghi.
In the US, stock index S&P 500 updated its record high, as the market is supported by hopes that the restarting talks between US President Donald Trump and Chinese counterpart Xi Jinping would end trade tensions.
The US dollar has been the biggest gainer among Forex majors, as the Nonfarm Payrolls report turned out more positive than expected.
In the cryptocurrency market, Bitcoin is still uncertain about its next short-term direction, currently trading at around $11,800.
Japan’s Household Spending Brings Hope
Japan’s household spending in May increased at the fastest pace since 2015, providing some hope for the economy that domestic demand will offset some of the losses caused by external factors. On Friday, the Japanese government said that household spending rose 4.0% in May compared to the same period in 2018. The performance is related to the country’s 10-day holiday. Economists on average predicted an increase of 1.6%. Compared to April, the indicator rose 5.5% for the month against an expected gain of only 1.2%.
Australia’s RBA Cut Interest Rate
On Tuesday, the Australian central bank cut its interest rate by 0.25% to a record low of 1.0%, which is in line with analysts’ expectations. The move is meant to boost economist growth and reduce the unemployment level. Australian GDP is growing at the slowest pace since the period following the financial crisis in 2008. The Reserve Bank of Australia (RBA) announced the decision after its monthly policy meeting.
Eurozone’s Factory Activity Falls Below Expectations
Eurozone’s factory activity declined in June at a faster pace than previous estimates, according to a survey published by IHS Markit on Monday. Thus, the final reading of the manufacturing purchasing managers’ index (PMI) was 47.6, down from May’s 47.7 and below an earlier estimate of 47.8. June is the fifth straight month of negative readings in the index. The negative data might put additional pressure on the European Central Bank to implement more stimulus measures.
Sino-US Trade War Might Cease
Top officials of the US and China told reports that the two countries, which have been under a trade war for months, are looking to restart the talks this week in an attempt to address the tensions. White House Economic Adviser Larry Kudlow said that the negotiations would continue in the week the ends July 14. The main negotiators representing the US are Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. On China’s side, the principal negotiator is Vice Premier Liu He
Chinese Factory Activity Declines
Factory activity in China declined more than expected last month, according to data presented by the government’s National Bureau of Statistics on Sunday. Thus, the manufacturing purchasing managers’ index (PMI) was unchanged at 49.4 in June. Economists surveyed by Reuters expected a slight increase to 49.5. The negative reading means that China is losing strength despite significant support from the government over the past months. Investors hope that the restart of US-China talks will benefit the economies of both countries.
British Companies Lose Confidence in Domestic Economy
UK firms have turned pessimistic over the domestic economy as the political crisis still persists. A survey carried out by the Institute of Directors (IoD) revealed that confidence of British businesses in the economy declined to -28% in the period between May 22 and June 5, compared to April’s -19%. This represents the first decline since the start of the year. The companies turned gloomier amid Theresa May’s announcement that she would leave her position as prime minister.
Upcoming News to Watch
On Tuesday, the markets in Brasilia will be closed for the Sao Paulo State Rebellion Day. Meanwhile, China will report on its consumer price index (CPI) and producer price index (PPI).
On Wednesday, the UK will release data on GDP growth, industrial production, manufacturing production, and trade balance, among others. Elsewhere, the Bank of Canada will present its interest rate decision.
The US will publish its inflation data on Thursday, which will provide more hints to the Fed, which might consider another rate cut this month.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets.