Hey Folks, markets continue to grind higher while downside risks escalate. Get me take on the market price action in this week’s Round-Up;
WEEKLY SOUND BITES;
- Indexes recorded gains for the week, helping the large-cap benchmarks and the technology-heavy Nasdaq Composite Index to new all-time highs. A sharp rise in longer-term interest rates following Friday’s strong monthly payrolls report augured well for banks’ lending margins and boosted financials shares, and the small utilities sector also outperformed.
- Friday’s Job numbers seemed to provide stocks another leg up on Friday. Employers added 943,000 jobs in June, showing since strict lockdowns were eased in the summer of 2020. IN addition, April and May gains were revised significantly higher; the labor participation rate and average weekly hours ticked up; average hourly earnings rose more than forecast (4.0% versus 3.8%); and the unemployment rate fell much more than expected to 5.4%, a new pandemic-era low. Also, the ISM index of July factory activity showed healthy growth (59.5, with levels over 50 indicating expansion), while the increase in June factory orders surprised on the upside (1.5% versus around 1.0%) off an upwardly revised base in May. The week’s biggest surprise may have been the ISM’s service sector index, which jumped to 64.1, well above expectations of 60.5. This was the largest beat in the history of the index, which dates back to 1967.
- Treasury yields jumped Friday morning following news of stronger-than-expected employment growth in July. Hawkish comments from Fed Vice Chair Richard Clarida and Fed Gov Christopher Waller added upward pressure on rates earlier in the week.
- Shares in Europe rose on strong growth in corporate earnings and optimism about an economic recovery. However, core eurozone bond yields trended lower, as an increase in coronavirus cases fueled doubts about the wider economic recovery. The BoE said that “some modest tightening of monetary policy over the forecast period is likely to be necessary” should the economy evolve broadly in line with the bank’s central projections. The BoE, which left its monetary policy and quantitative easing program unchanged at its latest meeting, now expects interest rates to rise from 0.1% to 0.2% in 2022 and to 0.5% in August 2024. The central bank updated its forecast for inflation, which is likely to peak at 4% either late in 2021 or in early 2022. The outlook still calls for the economy to grow 7.25% this year, but the BoE increased its forecast for 2022 gross domestic product to 6% from 5.75%. Eurozone producer prices rose 1.4% in June, from 1.3% in May, as energy prices surged. Excluding energy, producer prices ticked up 0.7% in June.
- In an update to its World Economic Outlook forecasts, the International Monetary Fund (IMF) downgraded Japan’s 2021 growth prospects, reflecting tighter coronavirus restrictions in the first half of the year as cases picked up. Japan was the only G7 industrialized nation to face a downgrade. The intergovernmental organization now projects that the country’s economy will grow by 2.8% year-on-year in 2021, down from the 3.3% growth it projected in April.
- In economic news, China’s official PMI readings for July pointed to slower economic momentum in the country’s manufacturing and services sectors. On the pandemic front, China grappled with its biggest COVID-19 outbreak since the virus appeared in the city of Wuhan in 2019.
ENJOY THIS WEEK’S ROUND-UP;
Don’t Be a Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
