Hey folks, many of you are coming off a long US Holiday weekend and in this shortened trading week we saw price action have some interesting moves across many different asset classes. Get my take in this week’s Round-Up below.
WEEKLY SOUND-BITES
- Indexes closed mostly mixed, with large-caps and growth stocks outperforming for the second consecutive week. The major driver of sentiment during the week appeared to be the steep decline in U.S. Treasury yields, with the yield on the benchmark 10-year Treasury note hitting a nearly five-month low on Thursday before climbing back somewhat to end the week. Perspectives seemed to shift on Thursday, with equity investors worrying that falling yields also signaled expectations for slowing global growth. However, on Friday we saw a larger than anticipated rebound in prices to move the S&P to all-time highs as the 10 Year Treasury yields also moved higher.
- The week’s economic data generally indicated strong growth but surprised modestly on the downside, which may have helped push both equities and Treasury yields lower. The Institute for Supply Management’s (ISM) gauge of service sector activity in June came in lower than expected, and the IBD/TIPP Economic Optimism Index fell back to its lowest level since February. Weekly jobless claims ticked higher, while May job openings rose a bit less than expected. Analysts polled by both FactSet and Refinitiv are currently expecting overall earnings for the S&P 500 to have expanded by nearly two-thirds over the year before.
- The rally in bond prices was driven primarily by technical factors, although the misses in the economic data also played a role. The 10-year Treasury note yield sank to 1.25% in intraday trading on Thursday before partially retracing earlier moves. Minutes from the Federal Open Market Committee’s June meeting, released Wednesday, seemed to evoke little reaction from market participants with the Fed saying they have not reached their goal of “substantial further progress” with most Fed Officials still being supportive of the current tapering regime.
- Coronavirus infection rates continued to surge in the UK and across continental Europe, where Spain experienced the worst outbreak, partly due to the spread of the highly transmissible delta variant. In a key changed in policy, The European Central Bank (ECB) adopted a 2% inflation target over the medium term—abandoning the previous objective of “below, but close to, 2%”—after reviewing its strategy. The ECB will also incorporate climate change into the framework of monetary policy operations in the areas of disclosure, risk assessment, corporate asset purchases, and collateral policy to take account of an issuer’s carbon emissions.
- On Friday, the People’s Bank of China unexpectedly announced that it would cut its reserve requirement ratio (RRR), the amount of cash most banks must hold in reserve at the central bank. The timing and size of the reduction—days before China reports its second-quarter GDP on July 15—suggested that Beijing was worried about flagging economic growth.
Enjoy This Week’s Round-Up
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
