The US reporting season is gaining momentum. Inflation in New Zealand hit an all-time high

By JustForex

Friday’s macro data showed that US retail sales rose more than expected in June. The Federal Reserve Bank of New York’s index of general business conditions increased to +11.1 from -1.2. A value above zero indicates growth and the July figure beat all forecasts in a Bloomberg survey of economists. At the same time, the Fed Bank Business Conditions Index fell more than 20 points to -6.2, the biggest drop since the terrorist attacks in September 2001. Also late last week the US Federal Reserve released fresh statistics on the change in assets on the balance sheet. The data showed a $69.2 billion drop in assets, while reserves in the banking system increased. The growing surplus of dollar liquidity in the financial system led to the closing of longs on the US currency, which led to some decline of the dollar on Thursday and Friday. At the same time, stock indices were rising for the last 2 days of last week. By the close of stock markets on Friday, Dow Jones (US30) gained 2.15% (+0.03% for the week), and S&P 500 (US500) added 1.92% (-0.46% for the week). The NASDAQ Technology Index (US100) jumped by 1.79% (-0.63% for the week).

The odds of a 100 basis point hike declined slightly after two of the Fed’s most hawkish spokesmen, Bullard and Waller, said Thursday that they would prefer a 75 basis point hike. Atlanta Fed President Rafael Bostic on Friday also warned the Central Bank against acting “too harshly” because it could undermine high hiring and other positive trends still seen in the economy. But a 20% chance of a 100 basis point rate hike remains, which is also significant.

The US bank reporting season began on a weak note. There will be a lot of big names reporting this week. Today investors should pay attention to the reports of Bank of America (BAC), IBM (IBM), Charles Schwab (SCHW), and Goldman Sachs (GS).

Equity markets in Europe were mostly up Friday. German DAX (DE30) gained 2.76% (+0.64% for the week), French CAC 40 (FR 40) jumped by 2.04% (+1.89% for the week), Spanish IBEX 35 (ES35) added 1.81% (-0.49% for the week), British FTSE 100 (UK100) was up by 1.69% (-0.52% for the week).

Europe is in a difficult position. Inflation is at record highs, with growing fears that Europe could be cut off from Russian natural gas, and that could be an uncontrollable and difficult variable for European economies. The ECB is in a quandary with Europe, trying to balance the need for higher interest rates against the impact that high rates could have on an already struggling European economy. A political crisis is also looming. Boris Johnson has already resigned in Britain. In Italy, Mario Draghi was also set to resign, but his resignation was not accepted. German Olaf Scholz is now under huge criticism.

Investors in Europe are also now focused on whether the critical Nord Stream 1 pipeline to Germany from Russia will reopen after being closed for maintenance last week. It is scheduled to reopen on July 21, but European governments are concerned that Moscow may extend it to limit gas supplies to Europe, disrupting plans for winter storage.

Traders should keep a close eye on the oil market this week. Preliminary information suggests that US President Joe Biden has reached an agreement with Saudi Crown Prince Mohammed bin Salman to produce more oil, so oil prices could be very volatile. White House officials also said ahead of Biden’s visit to the kingdom that they hoped OPEC and its non-OPEC partners would take additional measures to increase oil supplies to help deal with rising domestic gasoline prices. But officially at this point, Saudi Arabia has not made any specific commitments to the US to increase oil production and will only do so if there is a shortage in the market.

Asian markets traded lower last week. Japan’s Nikkei 225 (JP225) decreased by 0.39% for the week, Hong Kong’s Hang Seng (HK50) lost 5.46% for the week, and Australia’s S&P/ASX 200 (AU200) was down by 1.08% for the week. On Monday’s opening, the Asian market is increasing.

New Zealand’s consumer price index increased by 1.7% in the last quarter, (expected +1.8%). Annual inflation accelerated to 7.3% from 6.9%, the highest level since 1990. In May, the central bank projected that inflation would peak at 7% this year and then return to the upper end of the range by the end of 2023.

In the commodities market, natural gas futures (+17.92%) showed the biggest gain over the week. Futures on palladium (-15.56%), wheat (-12.39%), lumber (-9.25%), coffee (-9.21%), orange juice (-7.89%), copper (-7.86%), cotton (-7.24%), gasoline (-7.17%), WTI oil (-6.89%), platinum (-5.69%), Brent oil (-5.5%), corn (-4.26%), and silver (-2.99%) showed the biggest drop.

S&P 500 (F) (US500) 3,863.16 +72.78 (+1.92%)

Dow Jones (US30) 31,288.26 +658.09 (+2.15%)

DAX (DE40) 12,864.72 +345.06 (+2.76%)

FTSE 100 (UK100) 7,159.01 +119.20 (+1.69%)

USD Index 107.98 −0.56 (−0.52%)

• – New Zealand Consumer Price Index (m/m) at 01:45 (GMT+3).

By JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.