Hey Folks, as the market price action grinds higher we are seeing an interesting push-pull on interest rates vs the renewed spread of COVID. Get my take on the markets below
WEEKLY SOUND BITES
- U.S. equities continued to grind higher making new All Time Highs even against a renewed spread of the coronavirus and its possible implications for future economic activity. The Senate passed a roughly USD 1 trillion bipartisan infrastructure package, including about USD 550 billion in new spending, that aims to rebuild traditional transportation infrastructure, improve access to broadband internet in rural areas, and upgrade the electric grid and water systems.
- U.S. economic data releases, all eyes were on the latest inflation numbers from the Bureau of Labor Statistics. The consumer price index (CPI) increased by 0.5% sequentially in July, a deceleration from the 0.9% registered in June and the smallest month-over-month uptick since March. Core consumer price inflation, which excludes volatile food and energy costs, came in at 0.3%. This slowdown in the inflation rate appeared to align with the prevailing narrative that increases in consumer prices should prove transitory as the economy works through pandemic-related bottlenecks. However, the producer price index (PPI) increased by 1.0% sequentially for a second consecutive month. This uptick in PPI came in higher than many economists had expected.
- Treasury yields climbed through most of the week, led by increases in long-maturity yields that helped steepen the Treasury yield curve. Comments from several Federal Reserve officials supporting a sooner-than-expected tapering of the central bank’s bond purchases appeared to spur selling activity earlier in the week. However, yields largely retraced their previous moves amid the release of a highly disappointing University of Michigan consumer sentiment survey.
- Shares in Europe advanced as investors focused on the economic recovery and shrugged off worries about surging coronavirus infections in key markets and signs of slowing growth in Asia. The UK economy expanded by 4.8% sequentially in the second quarter, driven by a rise in household consumption as lockdown rules were lifted. The quarterly rate was below the BoE’s forecast for 5%. The level of gross domestic product is 4.4% below where it stood at the end of 2019, lagging other advanced economies. Industrial production in the eurozone fell 0.3% sequentially in June, as supply bottlenecks weighed on German factory output. Revised data from the EU’s statistics office pegged the sequential contraction in eurozone industrial production in May at 1.1%, down from the previous estimate of a 1.0% drop.
- Japan’s stock market registered modest gains for the week. The number of new coronavirus cases nationwide topped 18,000—a daily record. Tokyo has seen an alarming rise in infections. Japanese wholesale prices rose in July at their quickest annual rate in 13 years, mainly due to rising import costs being up 5.6% year over year, following a 5.0% increase in June.
- Chinese stocks recorded modest gains despite worries that increased government oversight of the country’s technology and private education industries would spread to other sectors. Last year, China added 2.38 million manufacturing jobs but lost 9.16 million jobs in services, according to the National Bureau of Statistics employment data. Inflation trends were broadly unchanged in July, with a 9.0% year-over-year surge in the producer price index driven by higher commodity prices and a 1.3% increase in core CPI.
Enjoy this Week’s Round-Up
Don’t Be a Rat Brain Trader – Be the Red Strip Zebra !!
Trade Smart !
hpb
