The Week Ahead – Economic Data, Monetary Policy, and COVID-19 in Focus

On the Macro

It’s quieter week ahead on the economic calendar, with 51 stats in focus in the week ending 6th August. In the week prior, 71 stats had also been in focus.

For the Dollar:

From the private sector, ISM Manufacturing and Non-Manufacturing PMIs for July will be in focus.

Expect the Non-Manufacturing PMI due out on Wednesday to have the greatest impact.

On the labor market front, ADP nonfarm employment change and weekly jobless claims figures on Wednesday and Thursday will also influence.

Nonfarm payrolls at the end of the week, however, will be the key stat of the week.

In the week ending 30th July, the Dollar Spot Index fell by 0.79% to 92.174.

For the EUR:

It’s a busy week on the economic data front.

Private sector PMIs for Italy and Spain together with finalized numbers for France, Germany, and the Eurozone will influence.

Expect Italy and the Eurozone’s PMIs to be key in the week.

German and Eurozone retail sales figures will also influence, with consumption key to a sustainable economic recovery.

For the week, the EUR rose by 0.84% to $1.1870.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

Finalized private sector PMIs for July are due out on Monday and Wednesday.

Expect any revisions to the services PMI to have a greater impact in the week.

Construction PMIs also due out, should have a muted impact, however.

While the finalized numbers will influence, the Bank of England monetary policy decision on Thursday will be the main event.

Last week, the IMF talked up the outlook for the British economy. It now rests in the hands of the BoE.

The Pound ended the week up by 1.13% to $1.3904.

For the Loonie:

It’s a busier week ahead on the economic calendar.

Trade data on Thursday and employment change figures on Friday will be the key numbers.

While trade figures will influence, expect the employment change figures to have a greater impact.

The Loonie ended the week up 0.71% to C$1.2475 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Manufacturing sector data, building permits, retail sales, and trade data will be in focus.

Retail sales and trade data, due out on Wednesday and Thursday, will be the key stats of the week.

On the monetary policy front, however, the RBA monetary policy decision on Tuesday will be the main event.

The Aussie Dollar ended the week down by 0.30% to $0.7344.

For the Kiwi Dollar:

It’s a quiet week ahead. Mid-week, employment change figures will draw interest ahead of inflation expectation numbers on Friday.

With little else for the markets to consider in the week, expect both sets of numbers to provide direction. The markets are expecting a further pickup in inflationary pressures…

The Kiwi Dollar ended the week flat at $0.6974.

For the Japanese Yen:

Finalized private sector PMIs and Tokyo inflation figures will be in focus in the 1st half of the week.

Expect any revision to the PMIs to be of greater influence.

Late in the week, household spending figures will also draw interest.

The Japanese Yen rose by 0.75% to ¥109.720 against the U.S Dollar.

Out of China

It’s a busier day, with private sector PMIs to provide the markets with direction.

Following NBS numbers from the weekend, the market’s preferred Caixin manufacturing PMI will set the tone. Over the weekend, the NBS Manufacturing PMI fell from 50.9 to 50.4…

With service sector activity a greater component of the economy, Wednesday’s services PMI will also influence, however.

The Chinese Yuan ended the week up by 0.31% to CNY6.4614 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. News updates from the Middle East will also need continued monitoring…

European Equities: A Month in Review – July 2021

The Majors

It was another bullish month for the European majors in July, logging a 6th consecutive monthly gain.

The CAC40 and the EuroStoxx600 rose by 1.61% and by 1.97% respectively, while the DAX30 struggled, rising by just 0.09%.

It was a choppier month for the European majors. Concerns over the resilience of the economic recovery tested support for the majors at the start of the 3rd quarter of the year.

A continued rise in new COVID-19 cases across the world added to the market angst in the month.

Economic data from Germany was also disappointing, pegging the DAX30 back.

Central bank assurance of support, dip buying, corporate earnings, and economic data for France and the Eurozone delivered support, however.

The Stats

Key stats in the month included inflation, consumer spending, consumer sentiment, private sector PMIs, and 2nd quarter GDP numbers.

Once more, the stats were skewed to the positive, delivering support to the broader market.

The Private Sector

The Eurozone’s composite PMI rose from 59.5 to 60.6 in July, according to prelim numbers. Service sector activity picked up, delivering the upside at composite level.

Germany’s Manufacturing PMI increased from 65.1 to 65.6, which was key as private sector activity across France saw slower growth.

As a result of weak numbers from France, the Eurozone’s Manufacturing PMI fell from 63.4 to 62.6.

The German Economy

From Germany, while survey-based numbers were upbeat, non-survey-based data disappointed in the month.

Factory orders (-3.7%) and industrial production (-0.30%) were weak, with Germany’s trade surplus narrowing from 15.9bn to 12.6bn EUR.

German business and consumer confidence also failed to impress in spite of the reopening of the economy. Rising cases of the Delta variant across the world raised uncertainties over the economic outlook in the month.

Late in the month, 1st estimate GDP numbers for the 2nd quarter were also in focus.

The German economy expanded by 1.5%, quarter-on-quarter, partially reversing a 2.1% contraction from the previous quarter. Economists had forecast 1.9% growth.

A positive in the week, however, was a fall in the unemployment rate from 5.9% to 5.7%, which should support consumption.

The Eurozone

For the Eurozone, the economy expanded by 2.00% in the 2nd quarter, reversing a 0.3% contraction from the previous quarter.

The numbers were aligned with the ECB’s optimistic outlook on the economic recovery.

Inflation

In the month, the ECB also revised its price stability target, increasing the inflation target to 2.0%. The move was viewed as dovish, giving the ECB more legroom before having to make a move on the policy front.

In spite of this, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, according to prelim figures.

From the U.S

Economic data delivered mixed results for the markets.

Inflationary pressures continued to build, though following assurances from the FED, failed to spook the markets.

The market’s preferred ISM private sector PMIs for June were disappointing for June, which raised concerns over the economic recovery.

Weekly jobless claim figures also failed to impress, with claims falling to a month low 360k before climbing to a high 419k.

In the final week of the month, consumer confidence and 2nd quarter GDP numbers delivered mixed results.

Consumer confidence picked up in July, suggesting a further increase in consumption. In June, retail sales had risen by a modest 0.5%. On the economic growth front, however, the U.S economy grew by just 6.5% in the quarter, falling well short of a forecasted 8.5%.

Monetary Policy

In July, both the ECB and the FED left monetary policy unchanged. Both central banks delivered assurances of unwavering support, ultimately propping up the European majors in the month.

The Market Movers

For the DAX: It was a bearish month for the auto sector in June. Continental and BMW slid by 7.88% and by 6.09% respectively. Daimler and Volkswagen ended the month down by 0.44% and by 2.49% respectively.

It was also a bearish month for the banks. Deutsche Bank fell by 2.86%, with Commerzbank sliding by 9.03%.

From the CAC, it was a bearish month for the banking sector. BNP Paribas fell by 2.69%, with Credit Agricole and Soc Gen seeing losses of 0.42% and 0.52% respectively.

It was also a bearish month for the auto sector. Renault slid by 6.02%, with Stellantis NV ending the month down by 2.20%.

Air France-KLM fell by a further 3.71%, while Airbus SE rallied by 6.69%.

On the VIX Index

It was a first monthly gain in 6-months for the VIX in July.

Reversing a 5.55% loss from June, the VIX rose by 15.22% to end the month at 18.24.

In July, the S&P500 rallied by 2.27%, with the Dow and the NASDAQ ending the month up by 1.25% and by 1.16% respectively.

VIX 310721 Monthly Chart

The Month Ahead

Following some mixed numbers from Germany, we can expect increased sensitivity to the German numbers in the month ahead.

Private sector PMIs will also remain key, with any fall back in private sector PMIs likely to test support for the majors.

Following the latest spike in inflation, a further pickup in inflationary pressure will also raise questions over consumption. As a key component of the economic recovery, any concerns over consumption would also pressure the majors.

From the U.S, labor market numbers will now be the key area of focus as inflationary pressures continue to pick up.

Consumer confidence and consumption numbers will need to impress to support riskier assets.

From elsewhere, private sector PMIs and trade data from China will also need tracking.

Away from the economic calendar, COVID-19 news will also need monitoring. As new cases continued to rise in July, the threat of a vaccine resilient variant remains, which would materially impact the growth outlook.

European Equities: A Week in Review – 30/07/21

The Majors

It was another choppy week for the majors in the week ending 30th July, with the majors taking another slide to kickstart the week.

The DAX30 fell by 0.80%, while the CAC40 and the EuroStoxx600 ended the week with relatively modest gains of 0.67% and 0.05% respectively.

Concern over the continued rise in new Delta variant cases weighed on the markets and sentiment towards the economic outlook.

Mixed economic data from Germany, in particular, also pressured the markets in the week.

There were a number of support avenues for the majors, however.

Upward growth revisions from the IMF for advanced economies, a dovish FED, and corporate earnings provided support.

GDP numbers from France and the Eurozone were also ahead of forecasts at the end of the week. The data limited the damage in what was a bearish end to the week.

The Stats

Through much of the week, the German economy was in focus.

Business and consumer sentiment figures delivered mixed results. While business sentiment waned in July, consumer confidence remained unchanged, in spite of the reopening of economies.

Unemployment figures from Germany were upbeat. The unemployment fell from 5.9% to 5.7% in July.

Inflationary pressures continued to surge, however, with Germany’s annual rate of inflation accelerating in July to 3.8%.

At the end of the week, 1st estimate GDP numbers and prelim inflation figures were the key stats of the week.

Quarter-on-quarter, the French economy grew by 0.9% versus a forecasted 0.7% in the 2nd quarter.

Germany saw growth of 1.5%, falling short of a forecasted 1.9%. In the 1st quarter, the economy had contracted by 2.1%.

For the Eurozone, the economy grew by 2.0%, coming in ahead of a forecasted 1.5%. The economy had contracted by 0.3% in the previous quarter.

Inflation also ticked up, aligned with member state numbers. According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, rising above the ECB’s 2% target.

From the U.S

Consumer sentiment and durable goods orders drew attention early in the week.

In June, durable goods orders ex transportation rose by 0.3%, following a 0.5% increase in May.

More significantly was a pickup in consumer confidence in July. The CB Consumer Confidence Index rose from 128.9 to 129.1. Economists had forecast a decline to 126.0.

On Thursday, jobless claims and 2nd quarter GDP numbers were in focus. The stats were skewed to the negative, however.

In the 2nd quarter, the U.S economy grew by 6.5%. This fell well short of a forecasted growth of 8.5%.

Jobless claims also fell short of expectations, with initial jobless claims falling from 424k to 400k. Economists had forecast a decline to 370k.

At the end of the week, personal spending and inflation figures came in ahead of forecasts, however.

Personal spending rose by 1.0% in June, with the annual rate of inflation seeing a pickup from 3.4% to 3.5%.

While the stats were material, the FED monetary policy and press conference were the main events of the week.

In line with market expectations, the FED left policy unchanged. The FED Chair also looked to assure the markets that there would be no near-term moves, the guidance considered dovish.

The Market Movers

From the DAX, it was a mixed week for the auto sector. Daimler rose by 0.32% to buck the trend in the week. Continental slid by 2.49% to lead the way down, however. BMW and Volkswagen also struggled, ending the week down by 1.64% and by 1.34% respectively.

It was also a mixed week for the banking sector. Deutsche Bank rose by 1.18%, while Commerzbank fell by 0.18%.

From the CAC, it was a bullish week for the banks. BNP Paribas and Soc Gen rose by 1.74% and by 1.06% respectively, with Credit Agricole gaining 0.77%.

The French auto sector also found support with Stellantis NV and Renault seeing gains of 2.64% and 2.59% respectively.

Air France-KLM slipped by 0.05%, however, while Airbus rallied by 3.77%.

On the VIX Index

It was a back into the green for the VIX.

In the week ending 30th July, the VIX rose by 6.05%. Partially reversing a 6.78% fall from the previous week, the VIX ended the week at 18.24.

3-days in the green from 5 sessions, which included a 10.13% jump on Tuesday delivered the upside.

For the week, the NASDAQ fell by 1.11%, with the Dow and the S&P500 ending the week down by 0.36% and by 0.37% respectively.

VIX 310721 Daily Chart

The Week Ahead

It’s a relatively busy week ahead on the economic calendar.

Private sector PMIs for Italy and Spain will be in focus. Finalized numbers for France, Germany, and the Eurozone are also due out.

Any revisions to prelim numbers and Italy’s PMIs will likely draw the greatest interest.

Early in the week, Eurozone and German retail sales figures will also be key, however. The ECB is looking for a consumption driven economic recovery.

Later in the week, the ECB Economic Bulletin and member state trade data will also be in focus.

From the U.S, ISM Manufacturing and Non-Manufacturing PMIs will be key through the 1st half of the week.

On the labor market front, however, ADP nonfarm employment change, weekly jobless claims, and nonfarm payrolls will also influence.

Away from the economic calendar, corporate earnings and COVID-19 news updates need continued monitoring.

The Weekly Wrap – A Dovish FED and Weak Stats Left the Greenback in the Red

The Stats

It was a busy week on the economic calendar, in the week ending 30th July.

A total of 71 stats were monitored, which was up from 33 stats in the week prior.

Of the 71 stats, 37 came in ahead forecasts, with 30 economic indicators coming up short of forecasts. There were 4 stats that were in line with forecasts in the week.

Looking at the numbers, 42 of the stats reflected an upward trend from previous figures. Of the remaining 29 stats, 27 reflected a deterioration from previous.

For the Greenback, disappointing economic data and a dovish FED left the Dollar in the red. The Dollar Spot Index fell by 0.79% to 92.174. In the previous week, the Dollar had risen by 0.24% to 92.906.

Out of the U.S

Consumer sentiment and durable goods orders drew attention early in the week.

In June, durable goods orders ex transportation rose by 0.3%, following a 0.5% increase in May.

More significantly was a pickup in consumer confidence in July. The CB Consumer Confidence Index rose from 128.9 to 129.1. Economists had forecast a decline to 126.0.

On Thursday, jobless claims and 2nd quarter GDP numbers were in focus. The stats were skewed to the negative, however.

In the 2nd quarter, the U.S economy grew by 6.5%. This fell well short of a forecasted growth of 8.5%.

Jobless claims also fell short of expectations, with initial jobless claims falling from 424k to 400k. Economists had forecast a decline to 370k.

At the end of the week, personal spending and inflation figures came in ahead of forecasts, however.

Personal spending rose by 1.0% in June, with the annual rate of inflation seeing a pickup from 3.4% to 3.5%.

While the stats were material, the FED monetary policy and press conference were the main events of the week.

In line with market expectations, the FED left policy unchanged. The FED Chair also looked to assure the markets that there would be no near-term moves, the guidance considered dovish.

Out of the UK

It was a particularly quiet week. There were no major stats for the markets to consider in the week.

The lack of stats left the Pound in the hands of IMF economic growth forecasts, which delivered Pound support.

In the week, the Pound rose by 1.13% to end the week at $1.3904. In the week prior, the Pound had fallen by 0.14% to $1.3748.

The FTSE100 ended the week up by 0.07%, following a 0.28% gain from the previous week.

Out of the Eurozone

Through much of the week, the German economy was in focus.

Business and consumer sentiment figures delivered mixed results. While business sentiment waned in July, consumer confidence remained unchanged, in spite of the reopening of economies.

Unemployment figures from Germany were upbeat. The unemployment fell from 5.9% to 5.7% in July.

Inflationary pressures continued to surge, however, with Germany’s annual rate of inflation accelerating in July to 3.8%.

At the end of the week, 1st estimate GDP numbers and prelim inflation figures were the key stats of the week.

Quarter-on-quarter, the French economy grew by 0.9% versus a forecasted 0.7% in the 2nd quarter.

Germany saw growth of 1.5%, falling short of a forecasted 1.9%. In the 1st quarter, the economy had contracted by 2.1%.

For the Eurozone, the economy grew by 2.0%, coming in ahead of a forecasted 1.5%. The economy had contracted by 0.3% in the previous quarter.

Inflation also ticked up, aligned with member state numbers. According to prelim figures, the Eurozone’s annual rate of inflation accelerated from 1.9% to 2.2% in July, rising above the ECB’s 2% target.

For the week, the EUR rose by 0.84% to $1.1870. In the week prior, the EUR had fallen by 0.30% to $1.1771.

The DAX30 fell by 0.67%, while the CAC40 and the EuroStoxx600 ended the week up by 0.67% and by 0.05% respectively.

For the Loonie

It was a relatively quiet week on the economic data front.

Inflation and GDP numbers were the key stats of the week.

In June, the annual rate of inflation softened from 2.8% to 2.7%, bucking the trend seen across key economies.

The Canadian economy also continued to struggle in May, with the economy contracting by 0.3%. The economy had contracted by 0.5% in April.

In the week ending 30th July, the Loonie rose by 0.71% to C$1.2475. In the week prior, the Loonie had risen by 0.39% to C$1.2564.

Elsewhere

It was a mixed week for the Aussie Dollar and the Kiwi Dollar.

While the Aussie Dollar fell by 0.30% to $0.7344, the Kiwi Dollar ended the week flat at $0.6974.

For the Aussie Dollar

Inflation was the main area of focus. The stats were mixed, however, pegging the Aussie Dollar back.

In the 2nd quarter, the annual rate of inflation surged from 1.1% to 3.8%. The trimmed mean rate of inflation picked up from 1.1% to 1.6%, however.

Wholesale inflation also saw a pickup but at a softer pace than anticipated.

Australia’s annual wholesale rate of inflation ticked up from 0.2% to 2.2%. Economists had forecast a rate of 3.5%.

For the Kiwi Dollar

It was a busier week, with trade and consumer and business confidence in focus.

Trade data disappointed, with the trade surplus narrowing from NZ$498m to NZ$261m in June. The narrowing stemmed from a more marked increase in imports, however, rather than a fall exports, which limited the damage.

Business and consumer confidence figures were also skewed to the negative. The ANZ Business Confidence Index fell from -0.60 to -3.80, with the ANZ Consumer Confidence Index falling from 114 to 113.1.

The week numbers were not enough to sink the Kiwi.

For the Japanese Yen

It was another relatively busy week.

Early in the week, private sector PMIs were in focus. Later in the week industrial production and retail sales also drew attention on Friday.

While prelim private sector PMIs softened slightly in July, industrial production and retail sales impressed.

Industrial production jumped by 6.2% in June, reversing a 6.5% slide from May. More significantly, retail sales increased by 3.1%, reversing a 0.4% decline from May.

The Japanese Yen rose by 0.75% to ¥109.72 against the U.S Dollar. In the week prior, the Yen had fallen by 0.44% to ¥110.550.

Out of China

It was a quiet week on the economic data front. There were no major stats from China for the markets to consider.

In the week ending 30th July, the Chinese Yuan rose by 0.31% to CNY6.4614. In the week prior, the Yuan had ended the week down by 0.03% to CNY6.4813.

The CSI300 and the Hang Seng ended the week down by 4.98% and by 5.46% respectively.

European Equities: 2nd Quarter GDP and July Inflation in Focus

Economic Calendar

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was another bullish day for the European majors on Thursday.

The CAC40 rose by 0.37%, with the DAX30 and the EuroStoxx600 ending the day up by 0.45% and by 0.46% respectively.

Market reaction to Wednesday’s dovish FED and economic data from the Eurozone and the U.S provided the majors with support.

From the Eurozone, German unemployment figures impressed, while stats from the U.S looked to have put a near-term lid on any need for the FED to make a move. U.S GDP and jobless claims figures were good enough, however, to support riskier assets and not spook the markets.

Support also came from corporate earnings releases on the day.

The Stats

The German economy was in focus once more on Thursday, with unemployment and inflation the key stats of the day.

In July, unemployment slid by 91k, following a 39k decline in June. As a result of the decline, the unemployment rate fell from 5.9% to 5.7%. Economists had forecast a 22k decline and for the unemployment rate to fall to 5.8%.

On the inflation front, Germany’s annual rate of inflation accelerated from 2.3% to 3.8% in July, according to prelim figures. Economists had forecast a pickup to 3.2%.

Month-on-month, consumer prices rose by 0.9%, following a 0.4% increase in June. Economists had forecast a 0.4% rise.

From the U.S

1st estimate GDP numbers for the 2nd quarter were out along with the weekly jobless claim figures.

In the 2nd quarter, the U.S economy grew by 6.5% in the 2nd quarter, ticking up from a 1st quarter 6.4%. Economists had forecast 8.5% growth in the quarter, however.

On the employment front, U.S jobless claims fell from 424k to 400k in the week ending 23rd July. Economists had forecast a decline to 370k.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Thursday. Daimler rallied by 2.80%, with BMW and Volkswagen ending the day up by 1.40% and by 1.28% respectively. Continental saw a more modest 0.80% gain on the day.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 3.23% and by 1.74% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas gained 1.78%, with Soc Gen and Credit Agricole rising by 1.55% and by 1.38% respectively.

It was also a bullish day for the French auto sector. Stellantis NV rallied by 3.36%, with Renault ending the day up by 0.62%.

Air France-KLM and Airbus SE also found further support, rising by 1.06% and by 0.61% respectively.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Thursday, marking the 2nd decline of the week.

Following a 5.42% fall on Wednesday, the VIX declined by 3.33% to end the day at 17.70.

The NASDAQ rose by 0.11%, with the Dow and the S&P500 ending the day up by 0.44% and by 0.42% respectively.

VIX 300721 Daily Chart

The Day Ahead

It’s a particularly busy day ahead on the economic calendar. Eurozone and member state 1st estimate GDP numbers for the 2nd quarter are due out later today.

Expect plenty of interest in the numbers. We have seen concerns over the resilience of the economic recovery test support for the majors of late. Weaker than expected numbers would weigh.

Prelim inflation and consumer spending figures are also due out but will likely play 2nd fiddle to the GDP numbers.

From the U.S, inflation and personal spending figures will also influence late in the session.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also need continued monitoring.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 21 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Economic Data from Germany and the U.S in Focus

Economic Calendar

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was a bullish day for the majors on Wednesday.

The CAC40 rallied by 1.18%, with the DAX30 and the EuroStoxx600 ending the day up by 0.33% and by 0.66% respectively.

Following the early in the week sell-off across the Chinese markets, the Hang Seng and CSI300 steadied mid-week, providing support.

Corporate earnings were also in focus, with better-than-expected numbers delivering support to the majors on the day. From France, Capgemini (+3.77%) and Kering (+3.64%) delivered the upside for the CAC40.

The Stats

German consumer sentiment was in focus going into the European open.

For August, the GfK Consumer Confidence Index held steady at -0.30. Economists had forecast a decline to -2.0.

According to the GfK survey,

  • Following a 10-year high, economic expectations moderated in July, falling by 3.8 points to 54.6.
  • Income expectations slipped by 5.1 points to 29 points, which was still up 10 points year-on-year.
  • By contrast, the propensity to buy was on the rise, increasing by 1.4 points to 14.8. In spite of the rise, consumption propensity was still down by almost 28 points year-on-year.

From the U.S

From the U.S, trade data was in focus late in the European session. The numbers had a muted impact on the European majors, however.

There was caution ahead of the post-European close FOMC interest rate decision and press conference.

After the European close, the FED avoided delivering any market shocks.

In line with market expectations, the FED left monetary policy unchanged, while acknowledging that the economic recovery was progressing.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Wednesday. BMW and Daimler fell by 0.08% and by 0.28% respectively. Continental and Volkswagen avoided the red, however, rising by 0.34% and by 0.60% respectively.

It was a bearish day for the banks, however. Deutsche Bank and Commerzbank ended the day down by 0.85% and by 0.35% respectively.

From the CAC, it was also a bearish day for the banks. Soc Gen fell by 0.41%, with BNP Paribas and Credit Agricole declining by 0.16% and by 0.22% respectively.

It was a bullish day for the French auto sector, however. Stellantis NV rose by 0.85%, with Renault ending the day up by 4.54%.

Air France-KLM and Airbus SE also found strong support, rising by 1.37% and by 2.65% respectively.

On the VIX Index

It was back into the red for the VIX on Wednesday, marking the first decline of the week.

Partially reversing a 10.13% jump from Tuesday, the VIX fell by 5.42% to end the day at 18.31.

The NASDAQ rose by 0.70%, while the Dow and the S&P500 ended the day down by 0.36% and by 0.02% respectively.

VIX 290721 Daily Chart

The Day Ahead

It’s a busier day ahead on the economic calendar. German unemployment and inflation figures are due out later today.

We can expect both sets of numbers to influence ahead of the U.S session.

From the U.S, weekly jobless claim and 2nd quarter GDP numbers will also influence.

Away from the economic calendar, corporate earnings and COVID-19 news updates will need monitoring, however.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 28 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: German Economic Data and Sentiment Towards the FED to Influence

Economic Calendar

Tuesday, 27th July

France Jobseekers Total JUN

Wednesday, 28th July

German GfK Consumer Confidence AUG

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was a bearish day for the majors on Tuesday.

The CAC40 fell by 0.71%, with the DAX30 and the EuroStoxx600 ending the day down by 0.64% and by 0.54% respectively.

There were no major stats from the Eurozone to provide the majors with direction in the day.

Market sentiment towards the rout across the Chinese markets weighed on the majors going into the open.

Providing some support late in the day was the IMF’s latest economic growth forecasts. For 2022, the IMF revised up its growth forecasts by 0.5 percentage points to 5.6% for advanced economies.

Economic data from the U.S was also market positive. U.S consumer confidence took an unexpected jump in July, aligned with the IMF’s outlook towards the U.S economy.

The Stats

Economic data was limited to jobseeker numbers from France, which had a muted impact on the European majors.

In June, the total number of job seekers declined from 3,490.1k to 3,417.6k. Economists had forecast a decline to 3,430.1k.

From the U.S

Durable goods orders and consumer confidence figures were in focus late in the session.

In June, durable goods orders increased by 0.8%, following a 3.2% rise in May. Durable goods orders ex transportation increased by 0.3%, following a 0.5% rise in May. Economists had forecast increases of 1.9% and 0.9% respectively.

Consumer confidence strengthened in July, with the CB Consumer Confidence Index rising from 128.9 to 129.1. Economists had forecast a decline to 126.0.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Tuesday. BMW and Volkswagen slid by 1.73% and by 1.86% respectively, with Continental and Daimler falling by 1.54% and by 1.52% respectively.

It was also a bearish day for the banks. Deutsche Bank declined by 0.52%, with Commerzbank ending the day down by 2.70%.

From the CAC, it was a bearish day for the banks. Credit Agricole fell by 1.09%, with BNP Paribas and Soc Gen declining by 0.91% and by 0.98% respectively.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day with modest losses of 0.20% and 0.13% respectively.

Air France-KLM slipped by 0.07%, while Airbus SE rose by 0.29%.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Tuesday.

Following a 2.21 gain on Monday, the VIX jumped by 10.13% to end the day at 19.36.

The NASDAQ fell by 1.21%, with the Dow and the S&P500 ending the day down by 0.24% and by 0.47% respectively.

VIX 280721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. German consumer confidence will be in focus going into the European session.

Economists have forecast for the GfK Consumer Confidence Index to fall from -0.3 to -2.0 for August.

From the U.S, there are no material stats due out to provide the majors with direction. While there are no stats to consider, the markets will be looking ahead to the FED interest rate decision and press conference. The European majors will need to wait until Thursday’s session, however, to respond.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also influence, however.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 87 points.

For a look at all of today’s economic events, check out our economic calendar.

 

European Equities: Futures Point to another Shaky Start for the Markets

Economic Calendar

Tuesday, 27th July

France Jobseekers Total JUN

Wednesday, 28th July

German GfK Consumer Confidence AUG

Thursday, 29th July

German Unemployment Change/Rate JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate Flash Q2

Italian GDP Growth Rate Adv Q2

Eurozone Core Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2

Italian Inflation Rate MoM Prel JUL

Eurozone Inflation Rate Flash JUL

The Majors

It was a mixed start to the week for the majors on Monday.

The CAC40 rose by 0.15%, while the DAX30 and the EuroStoxx600 ended the day down by 0.32% and by 0.08% respectively.

Economic data from Germany disappointed on Monday, pegging the DAX30 back at the start of the week,

In spite of the threat of the Delta variant on the economic recovery, the losses for the DAX30 and EuroStoxx600 were modest.

Market optimism towards a pickup in economic activity, supported by last week’s private sector PMIs and a dovish ECB remained key drivers.

The Stats

Business sentiment figures from Germany were in focus early in the European session.

In July, the Ifo Business Climate Index fell from 103.7 to 101.2, versus a forecasted decline to 103.6.

According to the July survey,

  • Sentiment towards current conditions improved, with the current conditions sub-index rising from 99.7 to 100.4.
  • Concerns over the outlook weighed, however, with the business climate sub-index falling from 101.7 to 100.8.

At sector level,

  • The index in manufacturing fell due to a marked decline in optimism in companies’ expectations. It was a 4th consecutive monthly decline.
  • By contrast manufacturer assessment of current conditions hit the highest level since Aug-2018.
  • There was a similar trend across the services sector, with the business climate sub-index weakening, while firms were more satisfied with their ongoing business.

From the U.S

New home sales figures for June were in focus that had a muted impact on the European majors.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Monday. Daimler rose by 0.03% to buck the trend. Continental slid by 1.50%, however, with BMW and Volkswagen falling by 0.40% and by 0.89% respectively.

It was a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 0.66% and by 1.41% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rallied by 2.25%, with Credit Agricole and Soc Gen rising by 1.73% and by 1.78% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 0.85% and by 1.04% respectively.

Air France-KLM rallied by 2.32%, with Airbus SE rising by 0.45%.

On the VIX Index

A run of 4 consecutive days in the red came to an end for the VIX on Monday.

Partially reversing a 2.77% fall from Friday, the VIX rose by 2.21% to end the day at 17.58.

The NASDAQ eked out a 0.03% gain, with the Dow and the S&P500 both ending the day up by 0.24% respectively.

VIX 270721 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the economic calendar. There are no major stats from the Eurozone to provide the majors with direction.

From the U.S, consumer confidence figures late in the day will provide the majors with direction, however.

Away from the economic calendar, corporate earnings and COVID-19 news updates will remain areas of focus.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 130 points, with the DAX down by 71 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: German Business Sentiment and COVID-19 in Focus

Economic Calendar

Monday, 26th July

German Ifo Expectations JUL

Tuesday, 27th July

France Jobseekers Total JUN

Wednensday, 28th July

German GfK Consumer Confidence AUG

Thursday, 29th July

German Unemployment Change JUL

German Inflation Rate MoM Prel JUL

Friday, 30th July

French GDP Growth Rate QoQ Prel Q2

French Household Consumption MoM JUN

German GDP Growth Rate QoQ Flash Q2

German GDP Growth Rate YoY Flash Q2

French Inflation Rate YoY Prel JUL

Spanish GDP Growth Rate QoQ Flash Q2

Spanish GDP Growth Rate YoY Flash Q2

Italian GDP Growth Rate QoQ Adv Q2

Italian GDP Growth Rate YoY Adv Q2

Eurozone Inflation Rate Flash JUL

Eurozone GDP Growth Rate Flash Q2 

The Majors

It was a bullish end to the week for the majors on Friday.

The CAC40 rose by 1.35%, with the DAX30 and the EuroStoxx600 ending the day up by 1.00% and by 1.09% respectively.

A further pickup in private sector activity across the Eurozone supported the majors at the end of the week.

With Monday’s sell-off a distant memory, optimism towards the earnings season and sentiment towards ECB monetary policy also delivered yet more upside.

The gains came in spite of disappointing PMI numbers from France, the UK, and from the U.S.

The Stats

French, German, and Eurozone private sector PMIs were in focus on Friday.

The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.

Economists had forecast PMIs of 57.9 and 58.7 respectively.

From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.

Economists had forecast PMIs of 63.7 and 59.1 respectively.

The Eurozone

For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.

Economists had forecast PMIs of 62.5 and 59.6 respectively.

According to the prelim Markit Survey,

  • The composite PMI rose to a 252-month high in July, according to prelim figures.
  • Business activity accelerated for a 4th consecutive month, supported by a continued easing of COVID-19 restrictions.
  • Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
  • Firms hired staff for a 6th consecutive month, with the pace of hiring the 2nd steepest since Jan-2018.
  • Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.

From the U.S

Prelim private sector PMI numbers for July were also in focus.

The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.

As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Friday. Daimler rallied by 5.00% to lead the way, supported by a broker upgrade to buy. Volkswagen and Continental rose by 2.66% and by 2.35% respectively, with BMW gaining 2.06%.

It was a mixed day for the banks, however. Deutsche Bank rose by 1.05%, while Commerzbank ended the day down by 0.04%.

From the CAC, it was a bullish day for the banks. Soc Gen rallied by 1.83%, with BNP Paribas and Credit Agricole rising by 1.18% and by 1.09% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 1.04% and by 0.97% respectively.

Air France-KLM slipped by 0.28%, while Airbus SE rose by 1.81%.

On the VIX Index

It was a 4th consecutive day in the red for the VIX on Friday.

Following a 1.23 decline on Thursday, the VIX fell by 2.77% to end the day at 17.20.

The Dow rose by 0.68%, with the NASDAQ and the S&P500 ending the day up by 1.04% and by 1.01% respectively.

VIX 260721 Daily Chart

The Day Ahead

It’s a relatively quiet day ahead on the economic calendar. Business sentiment figures from Germany are due out early in the European session,

Expect the headline Ifo Business Climate Index to have the greatest impact.

From the U.S, housing sector numbers, due out late in the session, should have a muted impact on the European majors.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also influence, however.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 1 point.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – Corporate Earnings, Economic Data, the FED, and COVID-19 in Focus

On the Macro

It’s busier week ahead on the economic calendar, with 71 stats in focus in the week ending 30th July. In the week prior, just 33 stats had also been in focus.

For the Dollar:

Core durable goods and consumer confidence figures will be in focus on Tuesday. While both sets of numbers are key, consumer confidence should have the greater influence.

On Thursday, 2nd quarter GDP numbers are due out alongside weekly jobless claims data.

While 2nd quarter GDP numbers will be the key driver, another increase in claims would overshadow any positive GDP numbers.

At the end of the week, personal spending and consumer sentiment figures will also draw attention.

In the week ending 23rd July, the Dollar Spot Index rose by 0.24% to 92.912.

For the EUR:

It’s a busy week on the economic data front.

Early in the week, the German economy will be back the spotlight.

German business and consumer sentiment and unemployment figures will be in focus in the 1st half of the week.

On Friday, the focus will then shift to 2nd quarter GDP numbers for France, Germany, and the Eurozone.

Throughout the week, member state and Eurozone prelim inflation figures for June will also draw attention.

For the week, the EUR fell by 0.30% to $1.1771.

For the Pound:

It’s a particularly quiet week ahead on the economic calendar.

Economic data is limited to housing sector data that should have a limited impact on the Pound.

A lack of stats will leave the Pound in the hands of COVID-19 news updates in the week.

The Pound ended the week down by 0.14% to $1.3748.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

Inflation figures are due out on Wednesday ahead of GDP numbers on Friday.

While both sets of numbers will influence, market risk sentiment and crude oil pries will remain the key driver. Rising COVID-19 cases continue to threaten to derail the global economic recovery and weigh on demand for crude oil.

The Loonie ended the week up 0.39% to C$1.2564 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Consumer and wholesale inflation figures are due out in the week.

While wholesale inflation will influence, expect consumer inflation figures to be key.

Away from the economic calendar, any new COVID-19 containment measures would further test Aussie Dollar support.

The Aussie Dollar ended the week down by 0.47% to $0.7366.

For the Kiwi Dollar:

It’s a quiet week ahead. Early in the week, stats are limited trade data. Late in the week, consumer confidence numbers will also be in focus.

While positive numbers will provide the Kiwi with support, market risk sentiment will influence.

Any further signs of a slowdown to the global economic recovery and expect the Kiwi Dollar to come under pressure.

The Kiwi Dollar ended the week down by 0.36% to $0.6974.

For the Japanese Yen:

Early in the week, private sector PMIs for July will be in focus.

Both sets of numbers will draw plenty of attention ahead of a busy 2nd half of the week.

At the end of the week, retail sales and prelim industrial production figures will have a greater impact on the markets.

The Japanese Yen fell by 0.44% to ¥110.550 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead, with no major stats to provide the markets with direction.

A lack of stats will leave chatter from Beijing in focus through the week.

At the end of the week, NBS private sector PMIs from China will come into view. The numbers are due out next weekend.

The Chinese Yuan ended the week down by 0.03% to CNY6.4813 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. Following the withdrawal of troops from Afghanistan, news updates from the Middle East will also need continued monitoring…

Corporate Earnings

Among the big names from the U.S include Apple Inc. (Tues), Microsoft Corp. (Tues), and Amazon.com Inc. (Thurs).

The Weekly Wrap – Another Win for the Greenback as COVID-19 Raises the Alarm

The Stats

It was a quieter week on the economic calendar, in the week ending 23rd July.

A total of 33 stats were monitored, which was down from 66 stats in the week prior.

Of the 33 stats, 15 came in ahead forecasts, with 18 economic indicators coming up short of forecasts. There were no stats that were in line with forecasts in the week.

Looking at the numbers, 14 of the stats reflected an upward trend from previous figures. Of the remaining 19 stats, all 19 reflected a deterioration from previous.

For the Greenback, market concerns over the resilience of the global economic recovery delivered Dollar support. Economic data from the U.S was mixed, however, limiting the upside. In the week ending 23rd July, the Dollar Spot Index rose by 0.24% to 92.912. In the previous week, the Dollar had risen by 0.60% to 92.687.

Out of the U.S

The markets had to wait until Thursday for the first set of key stats.

Jobless claim figures disappointed. In the week ending 16th July, initial jobless claims rose from 368k to 419k. Economists had forecast a decline to 340k.

At the end of the week, prelim private sector PMI numbers for July were also in focus.

The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.

As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily on the composite.

In the equity markets, the NASDAQ rallied by 2.84%, with the Dow and the S&P500 ending the week up by 1.06% and by 1.96% respectively.

Out of the UK

It was quieter week. On Thursday, CBI industrial trend orders disappointed, falling from 19 to 17. Economists had forecast a more modest decline to 18.

At the end of the week, retail sales and private sector PMI numbers were the key stats of the week, however.

In June, retail sales rose by 0.5% in June, partially reversing a 1.30% fall from May. Year-on-year, sales was up 9.7%, falling short of a forecasted 10.1% increase. In May, sales had been up by 24.6%.

Private sector PMIs were also disappointing. In July, the services PMI fell from 62.4 to 57.8, with the manufacturing PMI falling from 63.9 to 60.4.

As a result, the composite PMI fell from 62.2 to 57.7.

In the week, the Pound fell by 0.14% to end the week at $1.3748. In the week prior, the Pound had fallen by 0.96% to $1.3767.

The FTSE100 ended the week up by 0.28%, following a 1.60% loss from the previous week.

Out of the Eurozone

It was a quieter week.

Eurozone consumer confidence and French, German, and Eurozone private sector PMIs were in focus.

It was a mixed set of numbers, however.

Consumer confidence in the Eurozone waned in July, with the index falling from -3.3 to -4.4. Economists had forecast an increase to -2.6.

More significant, however, were the prelim PMI numbers for July.

The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.

Economists had forecast PMIs of 57.9 and 58.7 respectively.

From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.

Economists had forecast PMIs of 63.7 and 59.1 respectively.

The Eurozone

For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.

Economists had forecast PMIs of 62.5 and 59.6 respectively.

According to the prelim Markit Survey,

  • The composite PMI rose to a 252-month high in July, according to prelim figures.
  • Business activity accelerated for a 4th consecutive month, supported by a continued easing of COVID-19 restrictions.
  • Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
  • Firms hired staff for a 6th consecutive month, with the pace of hiring the 2nd steepest since Jan-2018.
  • Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.

On the monetary policy front, the ECB left rates unchanged, which was in line with market expectations. ECB President Lagarde continued to deliver assurances to the markets, ultimately leading to a pullback in the EUR and supporting the European boerses on the day.

For the week, the EUR fell by 0.30% to $1.1771. In the week prior, the EUR had fallen by 0.59% to $1.1806.

The CAC40 rose by 1.68%, with the DAX30 and the EuroStoxx600 ending the week up by 0.83% and by 1.49% respectively.

For the Loonie

It was a particularly quiet week on the economic data front.

Retail sales figures were in focus on Friday.

In June, retail sales fell by 2.1%, following a 5.7% slide in May. Economists had forecast a 3.2% decline.

A sharp rebound in crude oil prices provided the Loonie with much-needed support, however.

Early in the week, the Loonie had visited $1.27 levels against the Greenback before finding support.

In the week ending 23rd July, the Loonie rose by 0.39% to C$1.2564. In the week prior, the Loonie had fallen by 1.33% to C$1.2613.

Elsewhere

It was a bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 23rd July, the Aussie Dollar fell by 0.47% to $0.7366, with the Kiwi Dollar down by 0.36% to $0.6974.

For the Aussie Dollar

It was a quieter week, with retail sales and RBA meeting minutes in focus.

Retail sales disappointed, falling by 1.8% in June. Economists had forecast a 0.6% decline following May’s 0.4% rise. The downside stemmed from a reintroduction of COVID-19 containment measures, as new cases spiked once more.

The RBA meeting minutes had a relatively muted impact on the Aussie Dollar early in the week.

COVID-19 and concerns over the sustainability of the economic recovery pegged the Aussie back.

For the Kiwi Dollar

It was a particularly quiet week, with no major stats to provide the Kiwi Dollar with direction.

For the Japanese Yen

It was another relatively busy week.

Early in the week, inflation figures were in focus ahead of trade data on Wednesday.

Inflationary pressures returned in June, with Japan’s annual rate of inflation rising from -0.1% to 0.2%. The core annual rate of inflation ticked up from 0.1% to 0.2%.

In spite of the modest pickup, there was limited impact on the Yen. The numbers are unlikely to shift the BoJ’s stance on monetary policy.

On Wednesday, trade data was upbeat, with Japan’s trade balance rising from a ¥189.4bn deficit to a ¥383.2bn surplus. Year-on-year, exports were up 48.6% in June. In May, exports had been up by 49.6%.

The Japanese Yen fell by 0.44% to ¥110.55 against the U.S Dollar. In the week prior, the Yen had risen by 0.06% to ¥110.070.

Out of China

It was a quiet week on the economic data front, with no major stats from China for the markets to consider.

On the monetary policy front, the PBoC left loan prime rates unchanged, which was in line with expectations.

In the week ending 23rd July, the Chinese Yuan ended the week down by 0.03% to CNY6.4813. In the week prior, the Yuan had ended the week flat at CNY6.4792.

The CSI300 and the Hang Seng ended the week down by 0.11% and by 2.44% respectively.

European Equities: A Week in Review – 23/07/21

The Majors

It was a choppy week for the majors in the week ending 23rd July.

The CAC40 rose by 1.68%, with the DAX30 and the EuroStoxx600 ending the week up by 0.83% and by 1.49% respectively.

Concerns over the impact of the Delta strain on the economic recovery had sent the majors into the deep red on Monday.

Dip-buying, optimism towards corporate earnings, and ECB assurances supported a recovery, however.

Economic data in the week delivered mixed results, however, limiting the upside for the majors later in the week.

Key was a pickup in private sector activity in Germany…

The Stats

Eurozone consumer confidence and French, German, and Eurozone private sector PMIs were in focus.

It was a mixed set of numbers, however.

Consumer confidence in the Eurozone waned in July, with the index falling from -3.3 to -4.4. Economists had forecast an increase to -2.6.

More significant, however, were the prelim PMI numbers for July.

The French manufacturing PMI fell from 59.0 to 58.1, with the services PMI falling from 57.8 to 57.0.

Economists had forecast PMIs of 57.9 and 58.7 respectively.

From Germany, the manufacturing PMI rose from 65.1 to 65.6, with the services PMI rising from 57.5 to 62.2.

Economists had forecast PMIs of 63.7 and 59.1 respectively.

The Eurozone

For the Eurozone, the manufacturing PMI fell from 63.4 to 62.6, while the services PMI rose from 58.3 to a 181-month high 60.4.

Economists had forecast PMIs of 62.5 and 59.6 respectively.

According to the prelim Markit Survey,

  • The composite PMI rose to a 252-month high in July, according to prelim figures.
  • Business activity accelerated for a 4th consecutive month, supported by a continued easing of COVID-19 restrictions.
  • Demand was on the rise, with new order growth for the private sector at its fastest since May 2000.
  • Firms hired staff for a 6th consecutive month, with the pace of hiring the 2nd steepest since Jan-2018.
  • Average selling prices for goods and services rose at a near-term record pace, reflecting supply constraints.

On the monetary policy front, the ECB left rates unchanged, which was in line with market expectations. ECB President Lagarde continued to deliver assurances to the markets, ultimately supporting the European boerses on the day.

From the U.S

Jobless claim figures disappointed. In the week ending 16th July, initial jobless claims rose from 368k to 419k. Economists had forecast a decline to 340k.

At the end of the week, prelim private sector PMI numbers for July were also in focus.

The services PMI fell from 64.6 to 59.8, while the manufacturing PMI rose from 62.1 to 63.1.

As a result, the composite PMI slid from 63.7 to 59.7, with the all-important services PMI weighing heavily on the composite.

The Market Movers

From the DAX, it was a bullish week for the auto sector. Daimler rallied by 4.70% to lead the way, with Continental up 1.78%. BMW and Volkswagen saw more modest gains of 0.46% and 0.48% respectively.

It was a mixed week for the banking sector, however. Deutsche Bank rallied by 4.35%, while Commerzbank fell by 0.55%.

From the CAC, it was a bullish week for the banks. BNP Paribas and Soc Gen rose by 1.38% and by 1.33% respectively, with Credit Agricole gaining 1.92%.

The French auto sector also found support with Stellantis NV and Renault seeing modest gains of 0.55% and 0.81% respectively.

Air France-KLM and Airbus ended the week up by 0.41% and by 0.78% respectively.

On the VIX Index

It was a back into the red for the VIX, which saw red for the 3rd week in 5 weeks.

In the week ending 23rd July, the VIX fell by 6.78%. Partially reversing a 14.03% gain from the previous week, the VIX ended the week at 17.2.

4-days in the red from 5 sessions, which included a 12.31% slide on Tuesday and a 9.22% decline on Wednesday delivered the downside. The VIX had jumped by 21.95% at the start of the week.

For the week, the NASDAQ rallied by 2.84%, with the Dow and the S&P500 ending the week up by 1.08% and by 1.96% respectively.

VIX 240721 Weekly Chart

The Week Ahead

It’s a relatively busy week ahead on the economic calendar.

Early in the week, the German economy will be under scrutiny.

Business and consumer sentiment figures will be in focus.

Expect plenty of interest in the numbers that are due out on Monday and Wednesday.

On Thursday, unemployment numbers from Germany will also draw attention ahead of prelim GDP numbers on Friday.

GDP figures for France, Germany, and the Eurozone will be in focus at the end of the week.

Other stats in the week include member state and Eurozone inflation figures. Following Lagarde’s guidance on inflation, expect any spike in inflation to influence.

From the U.S, it’s also a busy week ahead.

On Tuesday, core durable goods and consumer confidence will be in focus.

The focus will then shift to the weekly jobless claims and 2nd quarter GDP numbers on Thursday.

Personal spending and consumer sentiment numbers wrap things up on Friday.

Away from the economic calendar, corporate earnings and COVID-19 news updates will also influence, however.

Stalling Signs? Taking a Look Under the Hood of US Equities

Greetings. I hope this article finds you and yours well. Today, we are taking a look at some additional market indicators and internals to get an unbiased perspective on things.

First, I want to preface things by mentioning that I am not suggesting that I am fully bearish on the S&P 500 or stocks right now. However, I am taking more of a cautious stance at the moment.

 

Figure 1 – S&P 500 Index April 15, 2021 – July 21, 2021, Daily Candles Source stockcharts.com

Nothing new to see here. Just another pedestrian pullback to the 50-day SMA and a bounce back. This pattern has repeated itself several times since the pandemic lows in the $SPX. It won’t repeat itself forever – that would be too easy.

Since it is earnings season, let’s talk earnings multiples.

Feeling bullish? It can be challenging to get excited about an $SPX at 4400 with an estimated 46.40 P/E ratio (trailing twelve months). We are in the middle of earnings season, so we will have a clearer figure soon.

Figure 2 – S&P 500 PE Ratio 1870 – July 22, 2021. Source multpl.com

Stocks are not cheap by any measure, folks. However, with easy monetary policy and low rates, this is to be expected. What could be the catalyst to derail this freight train?

How about the Dow Transports? This index used to be talked about much more frequently and is followed closely by students of Dow Theory. We just don’t hear much analysis about it on Fox Business, CNBC, or Bloomberg these days.

The Dow Transports (Dow Jones Transportation Average) $TRAN is an index comprised of 20 companies.

Here are the index components and weighting as of December 2020:

Alaska Air Group, Inc. 2.55%

American Airlines Group Inc. 0.76%

Avis Budget Group, Inc. 1.80%

C.H. Robinson Worldwide, Inc. 4.61%

CSX Corporation 4.39%

Delta Air Lines, Inc. 1.94%

Expeditors International of Washington, Inc. 4.61%

FedEx Corporation 13.10%

J.B. Hunt Transport Services, Inc. 6.70%

JetBlue Airways Corporation 0.70%

Kansas City Southern 9.73%

Kirby Corporation 2.51%

Landstar System, Inc. 6.60%

Matson, Inc. 2.79%

Norfolk Southern Corporation 11.42%

Ryder System, Inc. 3.12%

Southwest Airlines Co. 2.26%

Union Pacific Corporation 9.91%

United Airlines Holdings, Inc. 2.11%

United Parcel Service, Inc. 8.39%

Figure 3- Dow Jones Transportation Index January 4, 2021 – July 21, 2021, Daily Candles Source stockcharts.com

Here, and in contrast to the Dow Jones Industrial Average, we can see that the Transports topped back on May 10, 2021. Proponents of Dow Theory would argue that this creates a lack of confirmation and that the subsequent highs in the Dow Jones Industrial Average are not valid due to this lack of confirmation.

What could be the reason for the stall in the Transports? Input Costs? While fuel costs have risen, what about the rise in retail spending? Is the stimulus-powered consumer pocket not enough to counterbalance the rising input costs?

If input costs are the reason for the stalling, what about the other companies that rely on raw materials to make their products? Recent inflationary data has not affected these companies’ stock prices yet (for the most part).

What if the Fed eases off the gas pedal?

While it is very difficult (if not impossible) to pick market tops (and I don’t advocate trying to do that), it is wise to look at certain market indicators to get an understanding of what is going on beneath the surface.

It is easy to look at the chart of the $SPX and see that it is moving higher, from the bottom left-hand corner of the chart to the top right-hand corner. However, that does not tell the whole story of what is happening in the US equity markets.

We will be monitoring the above and previously mentioned market internals and indicators for more clues in the coming days, weeks, and months. I think it is critical to be aware of metrics such as the above as the broader indices trade near all-time highs.

Not a Premium subscriber yet? Go Premium and receive my Stock Trading Alerts that include the full analysis and key price levels.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

European Equities: Private Sector PMIs for July in the Spotlight

Economic Calendar

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was relatively bullish day for the majors on Thursday.

The CAC40 rose by 0.26%, with the DAX30 and the EuroStoxx600 ending the day up by 0.60% and by 0.56% respectively.

A busier economic calendar and the ECB monetary policy decision and press conference were key drivers on the day.

Away from the economic calendar, COVID-19, the spike in new cases, and possible impact on the global economic recovery remained a drag, however.

The Stats

consumer confidence figures for the Eurozone were in focus on the day.

In June, the Eurozone’s Consumer Confidence Index took an unexpected fall from -3.3 to -4.4. Economists had forecast an increase to -2.6.

While the stats were of influence, the ECB monetary policy decision and the press conference were the key drivers.

In line with market expectations, the ECB left monetary policy unchanged.

From the press conference, ECB President Lagarde looked to deliver further assurances that there would be no rate hikes until inflation reaches its 2% target.

Lagarde comment on inflation was categoric. “Our rate policy would be lifted only if the evidence is sufficiently clear, sufficiently persistent, sufficiently lasting and we have the degree of confidence that our inflation will reach 2% on a durable basis.”

With the Delta variant impacting many economies, the ECB President also highlighted the downside risks stemming from the pandemic.

From the U.S

Jobless claims figures were in focus. In the week ending 16th July, initial jobless claims rose from 368k to 419k. Economists had forecast a decline to 340k.

The Market Movers

For the DAX: It was a mixed day for the auto sector on Thursday. Daimler rose by 0.53% to buck the trend on the day. Volkswagen and Continental fell 1.37% and by 1.44% respectively. BMW saw a more modest 0.79% decline,

It was a bearish day for the banks, however. Deutsche Bank and Commerzbank ended the day down by 0.55% and by 1.02% respectively.

From the CAC, it was a bearish day for the banks. Soc Gen fell by 0.67%, with BNP Paribas and Credit Agricole declining by 0.55% and by 0.46% respectively.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day down by 0.57% and by 1.58% respectively.

Air France-KLM rose by a modest 0.41%, while Airbus SE fell by 1.01%.

On the VIX Index

It was a 3rd consecutive day in the red for the VIX on Thursday, reversing a run of 3 consecutive days in the green.

Following a 9.22% decline on Wednesday, the VIX fell by 1.23% to end the day at 17.69.

The NASDAQ rose by 0.36%, with the Dow and the S&P500 ending the day up by 0.07% and by 0.20% respectively.

VIX 230721 Daily Chart

The Day Ahead

It’s a busy day ahead on the economic calendar. Prelim private sector PMIs for France, Germany, and the Eurozone will be in focus. Expect plenty of interest in the numbers.

The markets will be looking for any economic speedbumps that would test support for the majors.

From the U.S, private sector PMIs are also due out. Expect the services PMI to have the greatest influence on the majors later in the session.

Away from the economic calendar, COVID-19 news updates will also need continued monitoring.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 49 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Economic Data and the ECB in the Spotlight…

Economic Calendar

Thursday, 22nd July

Eurozone Business Confidence

ECB Interest Rate Decision

ECB Press Conference

Eurozone Consumer Confidence Flash

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was particularly bullish day for the majors on Wednesday, following Tuesday’s more modest gains.

The CAC40 rallied by 1.85%, with the DAX30 and the EuroStoxx600 ending the day up by 1.36% and by 1.65% respectively.

A shift in focus towards corporate earnings provided support, with the upside coming in spite of continued concerns over the Delta variant.

Market expectation of strong earnings and also a dovish ECB was the key combination for the majors mid-week.

There were no major stats to materially dent the recovery from Monday’s losses.

Following Wednesday’s rally, the CAC40 moved into positive territory for the current week, while the DAX30 and the EuroStoxx600 remained in the red.

The Stats

It’s been a quiet start to the week on the economic calendar. Following a wholesale inflation figures from Germany on Tuesday, industrial sales figures from Italy were in focus.

Industrial Sales

In May, industrial sales decreased by 1.0%, partially reversing a 3.3% jump from April. Year-on-year, production was up by 40.2% versus a forecasted 45% increase. In April, production had been up by 105.1%.

According to iStat.it,

  • Industrial turnover fell by 1.9% in the domestic market, while rising by 0.7% in the non-domestic one.
  • The manufacturing sector saw industrial turnover contract by 1.4%.
  • In the 3-months to May 2021, total industrial production turnover levels increased by 4.7% when compared with the previous 3-month period.
  • Turnover rose by 5.4% in the domestic market and by 3.2% in the non-domestic market.
  • Year-on-year, turnover in the domestic market was up 41.0% and up by 38.6% in the non-domestic one.

From the U.S

There were no major stats to provide the majors with direction later in the European session.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Wednesday. Volkswagen and Continental rallied by 2.43% and by 2.86% respectively. BMW and Daimler saw more modest gains of 1.08% and by 0.68% respectively.

It was a particularly bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 4.33% and by 2.65% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 3.15%, with Soc Gen and Credit Agricole rallying by 3.29% and 3.21% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 3.43% and by 4.46% respectively.

Air France-KLM rose by 2.92%, with Airbus SE rallying by 4.38%.

On the VIX Index

It was a 2nd consecutive day in the red for the VIX on Wednesday.

Following a 12.31% slide on Tuesday, the VIX fell by 9.22% to end the day at 17.91.

The NASDAQ rose by 0.92%, with the Dow and the S&P500 ending the day up by 0.83% and by 0.82% respectively.

VIX 220721 Daily Chart

The Day Ahead

It’s a busy day ahead on the economic calendar.

Early in the European session, business confidence figures for the Eurozone will be in focus. While we expect the numbers to provide direction, the markets will be looking ahead to the ECB policy decision and press conference.

The ECB’s economic outlook and forward guidance on policy will be key. Following the ECB’s revision to its price stability objective, we can also expect plenty of Q&A on the new 2% objective.

After the ECB press conference, consumer confidence figures for the Eurozone will also influence.

From the U.S, jobless claims figures will also draw interest late in the European session. Market reaction may be delayed, however, with the release of the stats coinciding with the ECB press conference.

Away from the economic calendar, corporate earnings and COVID-19 news will also draw attention.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 18 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: Italian Industrial Production Figures in Focus

Economic Calendar

Thursday, 22nd July

Eurozone Business Confidence

ECB Interest Rate Decision

ECB Press Conference

Eurozone Consumer Confidence Flash

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was relatively bullish day for the majors on Tuesday.

The CAC40 rose by 0.81%, with the DAX30 and the EuroStoxx600 ending the day up by 0.55 and by 0.52% respectively.

A quiet day on the economic calendar allowed investors to buy the dip following Monday’s rout.

The upside was modest, however, with concerns over the economic outlook pegging the majors back on the day.

The Stats

Wholesale inflation figures for Germany were in focus going into the European open.

In June, Germany’s annual wholesale rate of inflation accelerated from 7.2% to 8.5%. Economists had forecast a pick up to 8.3%.

Month-on-month, the producer price index rose by 1.3% following a 1.5% increase in May. Economists had forecast a 1.0% rise.

From the U.S

Housing sector figures for June were in focus that had a muted impact on the European majors.

In June, building permits fell by 5.1% to 1.598m, while housing starts rose by 6.3% to 1.643m.

Housing starts had risen by 2.1% in May, with building permits having fallen by 2.9%.

The Market Movers

For the DAX: It was a bullish day for the auto sector on Tuesday. Volkswagen and Daimler rose by 1.80% and by 1.52% respectively. BMW and Continental saw more modest gains of 1.15% and by 1.21% respectively.

It was also a bullish day for the banks. Deutsche Bank and Commerzbank ended the day up by 1.63% and by 1.07% respectively.

From the CAC, it was a bullish day for the banks. BNP Paribas rose by 1.89%, with Soc Gen and Credit Agricole gaining 1.43% and 1.50% respectively.

It was also a bullish day for the French auto sector. Stellantis NV and Renault ended the day up by 0.25% and by 0.80% respectively.

Air France-KLM rose by a modest 0.34%, with Airbus SE rallying by 2.34%.

On the VIX Index

It was back into the red for the VIX on Tuesday, ending a run of 3 consecutive days in the green.

Partially reversing a 21.95% jump from Monday, the VIX fell by 12.31% to end the day at 19.73.

The Dow rose by 1.62%, with the NASDAQ and the S&P500 ending the day up by 1.57% and by 1.52% respectively.

VIX 210721 Daily Chart

The Day Ahead

It’s another quiet day ahead on the economic calendar, with no major stats due out of the Eurozone.

The lack of stats will give industrial production figures from Italy greater influence early in the European session.

From the U.S, there are no major stats to provide direction, however, leaving the majors to take direction from the U.S markets later in the session.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 51 points.

For a look at all of today’s economic events, check out our economic calendar.

European Equities: German Wholesale Inflation in Focus Following the Monday Rout

Economic Calendar

Thursday, 22nd July

Eurozone Business Confidence

ECB Interest Rate Decision

ECB Press Conference

Eurozone Consumer Confidence Flash

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was particularly bearish start to the week for the majors on Monday.

The EuroStoxx600 fell by 2.30%, with the DAX30 and the CAC40 ending the day down by 2.62% and by 2.54% respectively.

There were no major stats to provide the majors with direction, leaving the markets to respond to the fresh spike in new COVID-19 cases.

While Europe and the U.S remain open for business, low vaccination rates across other key economies and rising cases have led to a reintroduction of containment measures.

These measures have raised concerns over the pace of the economic recovery. Ahead of the latest spike, the markets had come under pressure after a string of disappointing numbers from Germany and China in particular.

All of this has been coupled with a continued pickup in inflationary pressures, another negative for the majors.

The Stats

There were no major stats from the Eurozone to provide the majors with direction at the start of the week.

From the U.S

There were also no stats from the U.S to guide the European majors late in the European session.

The Market Movers

For the DAX: It was a particularly bearish day for the auto sector on Monday. Continental slid by 3.08% to lead the way down, with BMW and Daimler falling by 2.95% and by 2.96% respectively. Volkswagen ended the day with a 2.55% loss.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank ended the day down by 2.05% and by 3.17% respectively.

From the CAC, it was a particularly bearish day for the banks. Soc Gen and BNP Paribas slid by 4.58% and by 4.19% respectively, with Credit Agricole falling by 3.09%.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day down by 3.60% and by 3.67% respectively.

Air France-KLM declined by 2.89%, with Airbus SE tumbling by 6.38%.

On the VIX Index

It was a 3rd consecutive day in the green for the VIX on Monday, marking a 4th gain in 7-sessions.

Following an 8.47% increase from Friday, the VIX jumped by 21.95% to end the day at 22.50.

The Dow slid by 2.09%, with the NASDAQ and the S&P500 ending the day down by 1.06% and by 1.59% respectively.

VIX 200721 Daily Chart

The Day Ahead

It’s a quiet day ahead on the economic calendar. German wholesale inflation figures for June are due out ahead of the European open.

With market sensitivity to inflationary pressures unlikely to abate any time soon, expect the numbers to influence.

Later in the day, economic data from the U.S includes housing sector numbers that should have a muted impact on the majors.

Away from the economic calendar, COVID-19 will continue to be an area of focus.

The Futures

In the futures markets, at the time of writing, the Dow Mini was up by 69 points.

For a look at all of today’s economic events, check out our economic calendar.

Inflation Nation: Pressure Builds, Underwater Beach Ball

Did you watch Fed Chair Powell testify in front of the Senate and House last week? It seemed to be like watching certain angry congresspeople calling for interest rates to be kept lower for longer. Do they want hyperinflation? Other groups of Senators reflected on what the inflationary environment was like in the early 1980s.

As Chair Powell testified, bonds rose (yields fell), and the S&P 500 was mostly lower. Clearly, there was a bid under the bonds (keeping interest rates lower). All of this came over a two-day period following the monstrous CPI print.

Recapping Tuesday through Friday in the E-Mini S&P 500 Futures Last Week:

Figure 1 – E-Mini S&P 500 Futures July 12, 2021 – July 16, 2021, 10:00 PM ET, 30 Minute Candles Source stooq.com

A. Tuesday 8:30 AM: CPI Data 0.9% vs. 0.5% expected, highest run rate ex-food and energy in 30 years.

B. Tuesday 1:00 PM: Weak 30-Year bond auction offered at 2.00% yield

C. Wednesday: Fed Chair testimony

D. Thursday: Fed Chair testimony

E. Friday: NY Cash Market Open

We can see the large CPI print was bearish for the index, and the market recovered. Then, we had the bond auction, which had very weak demand at 2.00%, and the index sold off again. It recovered once again, tested the highs, and was rejected. The Fed testimonies on Wednesday and Thursday kept the S&P 500 bid and sideways.

As all of this was occurring last week, I was eyeballing the index all day, each day, wondering when it would all become too much to keep the index afloat.

On Friday, we got a bullish Retail Sales number at 8:30 AM before the NY cash open, and then a bearish UoM Consumer Sentiment Print at 10:00 AM. The NY open was lower even before the bearish UoM print at 10:00 AM. It seemed like the index finally couldn’t bear the inflation data. The weak bond auction, and the congressional rhetoric during the Fed 2-day testimony any further and had to break. It actually made sense.

I want to illustrate the above A through E points in terms of interest rates last week.

Taking a look in terms of the 10-Year note yield:

Figure 2 – 10-Year Treasury Yield July 12, 2021 – July 16, 2021, Daily Candles Source stockcharts.com

The question I pose here: What if interest rates were rising towards the end of last week?

It doesn’t seem like the current market would be able to handle it. However, the Fed must use tools to curb inflation. This inflation seems anything but transitory or temporary at this point.

If bond yields were going higher on Friday with the market lower, how much would the INdex have dropped? That is the million-dollar question.

Rates do need to rise. But, if the Fed is not going to begin tapering (slowing bond purchases) or raising rates incrementally, what will happen with inflation?

If you hold a beach ball underwater, it eventually will pop up. You can’t keep it underwater forever.

This is food for thought as we begin the week.

Now, let’s cover all nine markets we are following for Premium Subscribers.

Thank you for reading today’s free analysis. I encourage you to sign up for our daily newsletter – it’s absolutely free and if you don’t like it, you can unsubscribe with just 2 clicks. If you sign up today, you’ll also get 7 days of free access to the premium daily Stock Trading Alerts as well as our other Alerts. Sign up for the free newsletter today!

Thank you.

For a look at all of today’s economic events, check out our economic calendar.

Rafael Zorabedian
Stock Trading Strategist

Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

This content is for informational and analytical purposes only. All essays, research, and information found above represent analyses and opinions of Rafael Zorabedian, and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. You should not construe any such information or other material as investment, financial, or other advice. Nothing contained in this article constitutes a recommendation, endorsement to buy or sell any security or futures contract. Any references to any particular securities or futures contracts are for example and informational purposes only. Seek a licensed professional for investment advice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Information is from sources believed to be reliable; but its accuracy, completeness, and interpretation are not guaranteed. Although the information provided above is based on careful research and sources that are believed to be accurate, Rafael Zorabedian, and his associates do not guarantee the accuracy or thoroughness of the data or information reported. Mr. Zorabedian is not a Registered Investment Advisor. By reading Rafael Zorabedian’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Trading, including technical trading, is speculative and high-risk. There is a substantial risk of loss involved in trading, and it is not suitable for everyone. Futures, foreign currency and options trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment when trading futures, foreign currencies, margined securities, shorting securities, and trading options. Risk capital is money that can be lost without jeopardizing one’s financial security or lifestyle. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Rafael Zorabedian, Sunshine Profits’ employees, affiliates, as well as members of their families may have a short or long position in any securities, futures contracts, options or other financial instruments including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice. Past performance is not indicative of future results. There is a risk of loss in trading.

 

European Equities: A Quiet Economic Calendar Leaves COVID-19 in Focus, a Market Negative

Economic Calendar

Thursday, 22nd July

Eurozone Business Confidence

ECB Interest Rate Decision

ECB Press Conference

Eurozone Consumer Confidence Flash

Friday, 23rd July

French Markit Manufacturing PMI Flash

French Markit Services PMI Flash

German Markit Services PMI Flash

German Markit Manufacturing PMI Flash

Eurozone Markit Services PMI Flash

Eurozone Markit Manufacturing PMI Flash

The Majors

It was bearish end to the week for the majors on Friday.

The EuroStoxx600 fell by 0.32%, with the DAX30 and the CAC40 ending the day down by 0.57 and by 0.51% respectively.

Following disappointing economic data from China on Thursday, the stats were no better on Friday.

Data for the Eurozone disappointed, with economic data from the U.S sending mixed results.

Rising delta variant cases globally and the need to reintroduce restrictions in some geographies weighed on demand for riskier assets.

The Stats

Finalized inflation figures and trade data for the Eurozone were in focus through the early part of the European session.

Trade

In June, the Eurozone’s trade surplus narrowed from €10.9bn to €7.5bn. Economists had forecast a widening to €16.4bn.

According to Eurostat,

  • Exports to the rest of the world increased by 31.9% to €188.2bn year-on-year.
  • Imports from the rest of the world jumped by 35.2% to €180.7bn, year-on-year.
  • Intra-euro areas trade rose by 45.4% to €181.5bn when compared with May 2020.
  • When compared with January-May 2020, euro area exports climbed by 13.3% to €957.9bn in the period January-May 2021.
  • Imports rose by 12.7% to €878.2bn in January-May 2021, when compared with the same period in 2020.
  • As a result, the trade surplus widened from €66.1bn to €79.7bn in the period January to May 2021, when compared with the same period in 2020.
  • Intra-euro area trade increased by 20.5% to €867.6bn in January-May 2021 compared with the same period in 2020.

Inflation

In June, the Eurozone’s annual rate of inflation softened from 2.0% to 1.9%, falling below the ECB’s new 2% target rate.

The core annual rate of inflation softened from 1.0% to 0.9%.

According to Eurostat,

  • A year earlier, the annual rate of inflation had stood at just 0.3%.
  • Portugal (-0.6%), Malta (+0.2%), and Greece (+0.6%) registered the lowest annual rates of inflation.
  • By contrast, Estonia (+3.7%) recorded the highest annual rate of inflation.
  • In June, the highest contribution to inflation came from energy prices (+1.16 percentage points).
  • Non-energy industrial goods (+0.31 pp), services (+0.28 pp), and food, alcohol, & tobacco (+0.15 pp) also contributed.

From the U.S

Retail sales and consumer sentiment figures were the main areas of focus.

Retail sales beat forecasts, with sales up 0.6% month-on-month. Economists had forecast a 0.5% decline following a 1.7% slide in May. Year-on-year, sales was up 18%, coming in ahead of a forecasted 14.0% increase. In May, retail sales had risen by 27.6% year-on-year.

According to prelim figures, the Michigan Consumer Sentiment Index fell from 85.5 to 80.8, however. Economists had forecast an increase to 86.0.

The Market Movers

For the DAX: It was a bearish day for the auto sector on Friday. Volkswagen and Continental fell by 1.47% and by 1.03% respectively. BMW and Daimler saw heavier losses, however, sliding by 2.69% and by 2.14% respectively.

It was also a bearish day for the banks. Deutsche Bank and Commerzbank ended the day down by 2.32% and by 2.21% respectively.

From the CAC, it was a bearish day for the banks. Soc Gen slid by 2.46%, with BNP Paribas and Credit Agricole falling 1.66% and by 0.97% respectively.

It was also a bearish day for the French auto sector. Stellantis NV and Renault ended the day down by 2.01% and by 1.18% respectively.

Air France-KLM and Airbus SE bucked the broader trend, however, rising by 2.82% and by 0.22% respectively.

On the VIX Index

It was a 2nd consecutive day in the green for the VIX on Friday, marking a 3rd gain in 6-sessions.

Following a 4.16% increase from Thursday, the VIX rose by 8.47% to end the day at 18.45.

The S&P500 fell by 0.75%, with the NASDAQ and the Dow ended the day down by 0.80% and by 0.86% respectively.

VIX 190721 Daily Chart

The Day Ahead

It’s a particularly quiet day ahead on the economic calendar. There are no material stats due out of the Eurozone to provide the majors with direction.

With no major stats from the U.S to consider, COVID-19 news updates and central bank chatter will remain in focus.

The Futures

In the futures markets, at the time of writing, the Dow Mini was down by 197 points, with the DAX down by 105 points.

For a look at all of today’s economic events, check out our economic calendar.

The Week Ahead – COVID-19 , Economic Data, and the ECB in Focus

On the Macro

It’s quieter week ahead on the economic calendar, with 32 stats in focus in the week ending 23rd July. In the week prior, 66 stats had also been in focus.

For the Dollar:

On Thursday, jobless claims will draw plenty of attention.

At the end of the week, prelim private sector PMIs for July will also be in focus.

Expect the services PMI and the initial jobless claim figure to be the key numbers of the week.

In the week ending 16th July, the Dollar Spot Index rose by 0.60% to 92.687.

For the EUR:

It’s a relatively busy week on the economic data front.

Late in the week, business and consumer confidence figures will be in focus. With the ECB looking for consumption to fuel the economic recovery, the numbers will influence.

On Friday, prelim private sector PMIs for France, Germany, and the Eurozone will also be in focus.

The markets will be looking for any economic speed bumps following disappointing stats from Germany recently.

On the monetary policy front, the ECB is also in action on Thursday. With the policy revamp and some uncertainty over the economic outlook, it should be an interesting press conference…

For the week, the EUR fell by 0.59% to $1.1806.

For the Pound:

It’s a relatively quiet week ahead on the economic calendar.

CBI industrial trend orders will draw interest on Thursday.

At the end of the week, however, private sector PMI and retail sales figures will be the key stats of the week.

A pickup in spending and service sector activity would deliver the Pound with strong support.

The Pound ended the week down by 0.96% to $1.3767.

For the Loonie:

It’s a relatively quiet week ahead on the economic calendar.

House price figures are due out along with retail sales data.

Expect the retail sales figures to be key on Friday. With economic data on the lighter side, crude oil prices and market risk sentiment will also influence in the week.

The Loonie ended the week down 1.33% to C$1.2613 against the U.S Dollar.

Out of Asia

For the Aussie Dollar:

Retail sales figures are due out on Wednesday. With consumer spending key to a sustainable economic recovery, Wednesday’s stats will draw plenty of interest.

On the monetary policy front, the RBA monetary policy meeting minutes are due out on Tuesday.

Following the RBNZ’s surprise move last week, any talk of a tightening of monetary policy would give the Aussie Dollar a boost.

The Aussie Dollar ended the week down by 1.16% to $0.7401.

For the Kiwi Dollar:

It’s a particularly quiet week ahead, with no major stats to provide the Kiwi with direction.

A lack of stats will leave the Kiwi in the hands of market risk sentiment in the week.

The Kiwi Dollar ended the week up by 0.19% to $0.6999.

For the Japanese Yen:

Inflation and trade data on Tuesday will be the only stats of the week. Expect the trade data to garner the greatest interest.

On Wednesday, the BoJ’s monetary policy meeting minutes are due out for the June meeting. We don’t expect the dated minutes to have a material impact on the Yen, however.

The Japanese Yen rose by 0.06% to ¥110.070 against the U.S Dollar.

Out of China

It’s a particularly quiet week ahead, with no major stats to provide the markets with direction.

A lack of stats will leave chatter from Beijing in focus through the week.

In the week, the PBoC is in action, though the markets are expecting loan prime rates to be left unchanged.

The Chinese Yuan ended the week flat at CNY6.4792 against the U.S Dollar.

Geo-Politics

Russia and China continue to be the main areas of interest for the markets. Following the withdrawal of troops from Afghanistan, news updates from the Middle East will also need continued monitoring…