Weekly Market Review - July 22-26
As of Friday, July 26, global stock markets were little changed over the week. The rate of the US 10-year bond slightly increased to 2.08% from 2.06%.
In the commodity market, gold and silver slightly declined on news that the US might reach a potential updated trade agreement with China. The price of a barrel of WTI crude oil slightly increased to $56.31.
In the forex market, the US dollar has been the best performer among majors, with the British pound and Australian dollar recording the biggest losses.
Bitcoin suddenly tumbled $500 on Friday, currently trading close to $9.500.
Here are the most important events of the week:
UK Has New Prime Minister
Boris Johnson became the new prime minister of the UK, replacing Theresa May, who officially resigned on Wednesday. Johnson promised to lead the country out of the European Union (EU) by the new deadline – October 31. He said that the Brexit would take place with or without the deal, adding to uncertainty for the UK. Nevertheless, there are few chances for the EU to renegotiate the agreement, which the UK Parliament had rejected three times by now. On the other hand, the parliament won’t accept a no-deal approach either.
Germany's Manufacturing Sector Struggling
Germany’s business activity is struggling because of weakening manufacturing. The country’s manufacturing purchasing managers’ index (PMI) declined this month to 43.1 from 45 in June, which is the lowest level since 2012. A reading below the 50 level points to contraction. The indicator suggests that Germany’s GDP growth is slowing down, mainly driven by the Sino-US trade tensions and Brexit uncertainty. On the other hand, the services sector maintained at 55.4, slightly lower than June’s 55.8.
US-China Negotiations to Restart Next Week
Sino-US talks might resume next week as US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are going to Shanghai to meet with China’s Vice Premier Liu He. The US hinted that it would prefer to return to the same level of trade relationships before the May tensions. Trump’s administration wants China to buy more agricultural goods from the US. On the other side, China hasn’t made a decision about the new requests, and it expects the US to give up tariffs imposed at the beginning of 2019.
US Existing Home Sales Decline
Last month, existing home sales in the US declined by 1.7%. Home prices in big West Coast cities fell for the first time in seven years. Year-on-year, home sales dropped by 2.2%, which is the 16th month in a row with annual declines. The real estate market hasn’t revived yet, despite increasing salaries, low unemployment, and lower mortgage rates. Nevertheless, the housing market noted an expansion in new home sales in June, rising 7% compared to May and 4.5% compared to June 2018.
US GDP Beat Estimates
US gross domestic product (GDP) growth slowed in the second quarter in 2019 by less than anticipated. The economy was driven by consumer spending, which performed better than expected. The Commerce Department said on Friday that the economy expanded at a 2.1% annualised rate against economists’ expectations of 1.8% growth. The 3.1% growth recorded in the first quarter was not revised. Consumer spending jumped 4.3% while government spending increased by 5%.
US Government to Increase Federal Spending
The White House and Congress agreed to raise federal spending for the next two years. It means that the budget caps established in 2011 will be removed and the debt ceiling will be postponed until July 2021. The federal spending will increase by $320 billion and will touch upon both defence and domestic spending. Under these conditions, debt as a per cent of GDP would increase from the current level of 78% to 97% by the end of 2029.
Upcoming News to Watch
Next week will be full of important events. First, several central banks will meet to decide possible changes in interest rate. The Bank of Japan, the US Federal Reserve, and the Bank of England will announce their interest rate decision on Tuesday, Wednesday, and Thursday, respectively.
On Monday, Japan will release data on its unemployment rate and industrial production.
On Wednesday, the eurozone will publish its economic growth data for the second quarter, along with the inflation index.
The week will end with several important US indicators that might shake the US dollar, including the nonfarm payrolls, unemployment rate, and trade balance.
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. Learn more.