• On Friday, the Nasdaq index dropped by 0.36%, the S&P 500 index fell by 0.53%, and the Dow Jones index fell by 0.43%.
• Dollar Index increased by 0.4% to reach the 102 level.
• Brent crude oil barrel price closed at $86.2 USD, after a 2.2% increase last week.
• 10-year US Treasury bond yield rose to 4.03% with an 8 basis point increase.
• 2-year US Treasury bond yield dropped to 4.76% after an 11 basis point decrease.
• Non-farm employment increased by 187,000 in July, though the previous month was downwardly revised to 24,000.
• Unemployment rate decreased from 3.6% to 3.5% in July. Labor force participation rate remained at 62.6%, the highest level since March 202
• Average hourly earnings increased by 0.4% on a monthly basis in July, exceeding expectation of 0.3%.
• July’s Consumer Price Index (CPI) to be released, with June’s CPI and PPI data below market expectations.
• Core CPI declined in both monthly and yearly rates.
• Weekly initial jobless claims slightly rose to 227,000, signaling tightness in labor market.
• Trade balance data for June expected to show decreased exports due to weak global demand and lowered imports due to high inflation and rising interest rates.
• University of Michigan’s preliminary Consumer Sentiment Index for August is expected to continue rising, reflecting eased inflation and stable labor market.
• German factory orders increased by 6.2% in May and by 7% in June, extending positive production signals.
• Industrial production data for June in Germany anticipated to show contraction of 0.5%.
• July’s German CPI data expected to maintain increase of 0.3% on a monthly basis, with slight decrease in annual rate to 6.2%.
• Preliminary UK GDP growth for Q2 2023 expected to remain stagnant with 0% quarterly growth.
• China’s trade data for July expected to show increased decline in exports and slowed decline in imports.
• Consumer Price Index (CPI) and Producer Price Index (PPI) for July in China anticipated to reflect deflationary trends.

• US Stock Market Performance and Dollar Index

On Friday, the daily basis decline in the Nasdaq index was 0.36%, the S&P 500 index fell by 0.53%, and the Dow Jones index closed with a drop of 0.43%. The Dollar Index closed last week with a 0.4% increase at the 102 level.

• Crude Oil Price and Treasury Yields

Following last week’s increase of 2.2%, Brent crude oil’s barrel price closed at $86.2 USD. The 10-year US Treasury bond yield finished last week at 4.03% with an 8 basis point rise. The more sensitive 2-year US Treasury bond yield, related to policy developments, closed last week at 4.76% after an 11 basis point decrease.

• US Employment Data Overview

In the US, employment data was monitored on Friday, including non-farm payrolls, unemployment rate, and average hourly earnings for July. Although non-farm employment slightly increased from 185,000 to 187,000 in July, the previous month’s figure was downwardly revised from 209,000 to 24,000, and the expectation was for a slight slowdown in employment growth. The increase in non-farm employment in July exhibited mild acceleration, but it remained below the 12-month average of 312,000, marking the lowest level since December 2020. Detailed data indicates that the majority of employment growth came from the private sector (an increase of 172,000), while public sector growth was limited (an increase of 15,000).

• Unemployment Rate and Labor Force Participation

Contrary to expectations of a flat rate around 3.6%, the unemployment rate decreased from 3.6% to 3.5% in July. Unemployment decreased by 116,000 to 5.84 million in July, and the number of employed individuals increased by 268,000 to 161.3 million. The labor force participation rate remained at 62.6%, maintaining its highest level since March 2020.

• Wage Growth and Inflation Trends

Regarding inflation trends, average hourly earnings, representing wage growth, increased by 0.4% on a monthly basis in July, surpassing the expectation of 0.3%. The yearly increase was 4.4%, in line with the previous month and slightly above the expected 4.2%. These data suggest that wage-related inflationary pressures remain significant.

• Key Data for Federal Reserve’s Policy Shaping

In terms of upcoming data crucial for shaping the Federal Reserve’s monetary policy, July Consumer Price Index (CPI) will be released on Thursday, followed by the Producer Price Index (PPI) on Friday. June’s CPI and PPI data came in below market expectations. In this context, the monthly CPI increase in June was 0.2%, slower than the expected 0.3%, causing the annual rate to drop from 4% to 3%. Core CPI, which excludes food and energy prices, also showed a decline in both monthly and yearly rates.

As for the July forecasts, the headline CPI is expected to increase by 0.2% on a monthly basis, raising the yearly rate from 3% to 3.3%. Core CPI is predicted to remain stable at a monthly increase of 0.2%, resulting in a yearly rate of 4.7%.

In the PPI data, the headline index is anticipated to rise from 0.1% to 0.2% on a monthly basis, with the annual rate increasing from 0.1% to 0.7%. Core PPI is also projected to rise from a monthly increase of 0.1% to 0.2%, while the yearly rate is expected to slightly slow down from 2.4% to 2.3%.

• Upcoming Economic Indicators and Sentiment Index

The weekly initial jobless claims will be monitored on Thursday. Recent figures indicated a slight increase from 221,000 to 227,000, remaining below historical averages and suggesting continued tightness in the labor market. Additionally, the trade balance data for June will be released on Tuesday, reflecting a decrease in exports due to weakening global demand and a drop in imports due to high inflation and rising interest rates.

The preliminary Consumer Sentiment Index from the University of Michigan for August will be observed on Friday. The July index increased to 71.6 from 64.4, reflecting the ongoing easing of inflation and the stable labor market. Expectations for one-year-ahead inflation increased slightly from 3.3% to 3.4%, while long-term inflation expectations remained at 3%.

• Robust Rise in German Factory Orders Amidst Positive Production Signals

In Germany, factory orders recorded a strong increase of 6.2% on a monthly basis in May, significantly exceeding expectations. Following this, in June, despite expectations of a monthly decline, factory orders exhibited a robust increase of 7%, extending its rise for the third consecutive month and providing a positive signal for production trends. This increase in June marked the largest surge in factory orders since June 2020.

• Eurozone Retail Sales 

In the Eurozone, retail sales showed a partial weakening by experiencing a monthly decrease of 0.3% in June, following a 0.6% increase in May. On an annual basis, the rate of decline slowed from 2.4% to 1.4%, continuing a contraction for the past nine months.

It’s anticipated that retail sales will remain under pressure in the upcoming period due to tightening financial conditions caused by the European Central Bank’s continued interest rate hikes, which have negatively impacted consumer demand.

• Germany’s Industrial Production and Investor Confidence

In Europe, the industrial production data for June in Germany will be followed on Monday. Industrial production in Germany had increased by 0.3% on a monthly basis in April and then decreased by 0.2% in May. It’s expected that industrial production in Germany will continue to contract in June, with a projected monthly decline of 0.5%.

Additionally, the Sentix Investor Confidence Index for August in the Eurozone will be released on Monday. The July data had shown a decrease from -17 to -22.5, reflecting concerns about the recession in the German economy in the first quarter of the year and the overall weak performance of the German economy. These factors led to a decline for the third consecutive month and brought the index to its lowest level in eight months.

The persistently strong core inflation data in the region and the signaling of continued interest rate hikes by the ECB are expected to maintain the weak trend in investor confidence, potentially putting pressure on growth.

• German CPI Data on ECB Monetary Policy

Tuesday will bring the final Consumer Price Index (CPI) data for July in Germany, which will also impact the European Central Bank’s monetary policy. According to preliminary data, the headline CPI in Germany had increased by 0.3% on a monthly basis in June, maintaining this increase of 0.3% in July, which aligned with expectations. On an annual basis, the rate slightly decreased from 6.4% to 6.2%. Additionally, the core CPI decreased from 5.8% to 5.5% in July.

• Anticipating UK’s Second Quarter GDP Growth

On Friday, preliminary Gross Domestic Product (GDP) growth for the second quarter of this year will be announced in the United Kingdom. The UK economy had experienced a slowdown in growth to 0.1% in the second quarter of last year, following a growth of 0.5% in the first quarter. In the third quarter, the economy had contracted by 0.1%. The fourth quarter showed limited growth of 0.1% on a quarterly basis, marking the lowest level since 2021. In the first quarter of this year, the economy had seen limited growth of 0.1% on a quarterly basis, while the annual growth rate decreased from 0.6% to 0.2%, reaching the lowest level in the past two years.

It is expected that the country’s economy will remain stagnant with 0% quarterly growth in the second quarter.

• Trade Data and Inflation Signals in China

In Asia, the trade data for July in China will be observed on Tuesday. In June, the year-on-year rate of decline in exports in China increased from 7.5% to 12.4%, surpassing expectations of a 10% decline. This marked the sharpest decrease since February 2020, signaling a significant drop since the beginning of the Covid-19 pandemic. Additionally, the rate of decline in imports also exceeded expectations, rising from 4.5% to 6.8%, higher than the anticipated 4.1% decline. These trade data had indicated an acceleration in the slowdown of global economic activity and the Chinese economy.

In July, it is expected that the year-on-year rate of decline in exports in China will rise from 12.4% to 12.6%, while the rate of decline in imports is projected to slow from 6.8% to 5.5%.

Consumer Price Index (CPI) and Producer Price Index (PPI) for July in China, which will provide signals about the trajectory of global inflation, will be followed on Wednesday. In June, the headline CPI in China had continued its fifth consecutive month of decline with a 0.2% drop, despite expectations of a 0% change. On an annual basis, the CPI had slowed to 0% from the anticipated 0.2%, marking the lowest level since the deflation in February 2021. The core CPI, excluding food and energy prices, had also experienced a decrease, with a 0.4% increase in June following a 0.6% increase in May, hitting the lowest level since March 2021.

The PPI had similarly continued its decline, with a 0.8% decrease in June after a 0.9% drop in May, marking the third consecutive month of decline. On an annual basis, the rate of decline in PPI had risen from 4.6% to 5.4%, exceeding expectations of a 5% decrease. This signified the fastest drop since December 2015, driven by weakening demand and moderate commodity prices.

In July, it is expected that the headline CPI will exhibit a 0.5% decrease on an annual basis, indicating deflation, while the annual rate of decline in PPI is projected to decrease from 5.4% to 5%.