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Weekly Wrap Up TRADETHENEWS.COM
STAFF
Sentiment holds up in the face of economic headwinds August 6 - August 10
- Markets were relatively subdued this week, characterized by light trading volumes. The European front was mostly quiet, with plenty of speculation about the nature and timing of renewed ECB bond buying. It is assumed that Spain will be the first euro zone nation to request help in holding down bond yields from the EFSF/ESM, although Spanish PM Rajoy was reluctant to make any commentary about his government's plans. China released a raft of July data that further intensified worries about its slowing economy: industrial output fell to +9.2%, the weakest growth rate since early 2010, while exports contracted for the fourth month in a row, up a mere 1% y/y. Germany disclosed that June industrial production declined slightly on a y/y basis (the figure was flat in May) while June factory orders were sharply lower on a y/y basis, raising concerns about Europe's growth engine. There was little consequential economic data published in the US besides the June trade data, which showed that the trade deficit fell to its lowest levels since the end of 2010, thanks mostly to low oil prices. Interestingly, McDonalds failed to report positive global monthly same store sales for the first time since early 2003. Fed governors have been quiet this week and markets are looking forward to the Jackson Hole conference at the end of August for more color on the potential for more QE. Fed dove Rosengren the FOMC must act to aid the economy, proposing a new round of mortgage bond purchases to drive rates even lower. Without all that much to pin it on risk sentiment was impressive throughout the week. Crude oil and US Treasury yields reached their highest levels in more than 2-months with the Sep WTI contract briefly approaching $95. The S&P cash market moved through 1400 and VIX fell below 15 for the first time since late March, while in Europe the Euro Stoxx 600 reached 5-month highs. For the week the DJIA rose 0.8%, the S&P500 gained 1.1%, and the Nasdaq was up 1.8%.
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