US Stock Indices, Dolar Index and Crude Oil

• Nasdaq index: -0.68%, S&P 500 index: -0.11%, Dow Jones index: +0.30%
• US Dollar Index (DXY) increased by 0.8% to 102.8.
• Brent crude oil prices rose by 0.7% to $86.8 per barrel.

US 10Y and 2Y Treasury Yields

• 10-year Treasury yield increased by 12 basis points to 4.15%.
• 2-year Treasury yield climbed by 14 basis points to 4.90%.

Producer Price Index (PPI)

• July PPI showed a monthly increase of 0.3%, surpassing expectations.
• PPI rose from 0.2% to 0.8% on a yearly basis.
• Core PPI increased by 0.3% in July, maintaining a yearly trend of 2.4%.

Consumer Confidence and Fed Meeting Minutes

• University of Michigan Consumer Confidence Index for August fell slightly to 71.2.
• Focus will be on FOMC meeting minutes for insights into future monetary policy.
• The federal funds rate was raised by 25 basis points to a range of 5.25%-5.50% in the last meeting.
• Powell mentioned potential for further rate hikes and tightening.

Industrial Production, Capacity Utilization

• Industrial production declined by 0.5% in May and June.
• Capacity utilization dropped to 78.9% in June, surpassing expectations.
• July expected to see 0.3% increase in industrial production.

Empire State Manufacturing Index

• Empire State Manufacturing Index dropped to 1.1 in August.
• Expected to further drop to -0.75, implying manufacturing sector contraction.

Retail Sales and Employment Data

• Retail sales increased by 0.2% in June.
• Core retail sales rose by 0.6%.
• July retail sales expected to accelerate to 0.4%.

Initial Jobless Claims

• Initial jobless claims increased to 248,000, remaining historically low.
• Expected to stay around 240,000, reflecting a tight labor market.

Housing Market

• Housing starts dropped by 8% in June.
• Building permits declined by 3.7%.
• July expected to show housing starts rebound of 0.8%.

Eurozone Manufacturing and GDP Growth

• Eurozone industrial production to remain stagnant in June.
• Revised GDP growth figures for Q2 in the Eurozone to be announced.

Eurozone and UK Inflation Indicators

• Eurozone headline CPI decreased in July.
• Core CPI in the Eurozone maintained levels close to record high.
• UK CPI increased 0.5% in monthly basis while decreased to 6.8% in yearly basis.

German Economic Sentiment

• ZEW current conditions and expectations indices for August in Germany to be released.

Norwegian Central Bank Interest Rate Decision

• Expectation for the Norwegian Central Bank to increase policy rate by 25 basis points.

China’s Economic Indicators: July Data

• July data for industrial production, retail sales, and fixed asset investment to be announced.
• Anticipated growth in retail sales and fixed asset investments.

Japan’s Q2 Economic Performance

• Preliminary GDP growth data for Q2 in Japan to be followed.
• Expected growth of around 0.8% on a quarterly basis.

Reserve Bank of New Zealand: Interest Rate Decision

Previous rate hikes paused, policy rate expected to remain at 5.50%

On Friday, the Nasdaq index closed the day with a daily decrease of 0.68%, and the S&P 500 index dropped by 0.11%, while the Dow Jones index recorded a 0.30% increase.

The US Dollar Index (DXY) concluded last week with a 0.8% increase, reaching a level of 102.8. Brent crude oil prices experienced a 0.7% rise, closing at $86.8 per barrel.

US 10Y and 2Y Treasury Yields

The 10-year Treasury yield saw an increase of 12 basis points, ending the week at 4.15%. The 2-year Treasury yield, which is more sensitive to monetary policy changes, climbed by 14 basis points to 4.90%.

Producer Price Index (PPI) Analysis

In the US, the Producer Price Index (PPI) for July were monitored closely. The headline PPI showed a monthly increase of 0.3% in July, surpassing expectations of a 0.2% rise. This growth marked the strongest level since January. On a yearly basis, PPI rose from 0.2% to 0.8%, benefiting from weaker base effects.

The increase in PPI was primarily driven by food prices reversing their three-month decline to a 0.5% increase, and service prices rebounding from a 0.1% decrease to a 0.5% increase. However, energy product prices remained flat, limiting the overall increase in PPI.

Within the service price category, the rise was influenced by trade services (wholesale and retail) rebounding by 0.7% after a decline of 0.8%, and transportation and storage services increasing by 0.5% from no change. Other service prices, excluding trade and transportation, grew by 0.3%, similar to the previous month.

The core PPI, which excludes food and energy prices, experienced a 0.3% increase in July, outperforming expectations of a 0.2% rise. On a yearly basis, it stood at 2.4%, maintaining its low trend since January 2021.

Consumer Confidence and Fed Meeting Minutes

The preliminary reading for the University of Michigan Consumer Confidence Index for August indicated a slight decrease, falling from 71.6 to 71.2, aligning with expectations.

Looking at the US economic calendar for this week, the focus will be on the release of the minutes from the Federal Open Market Committee (FOMC) meeting held on July 25-26, scheduled for Wednesday.

The minutes of the previous Fed meeting will be closely watched for potential new signals regarding the future of the monetary policy. The Fed’s decision during the last meeting was to raise the federal funds rate by 25 basis points to a range of 5.25%-5.50%, and the decision was unanimous. The decision text indicated potential further rate hikes, and the assessment of additional tightening measures to control inflation. After the decision, Fed Chair Powell mentioned that although inflation had moderated, there was still a long way to reach the 2% target and that inflation was still above target. He also noted that another rate hike was possible and that they could tighten further if needed. Therefore, the minutes of the FOMC meeting will be important in providing insights into the future path of the Fed’s monetary policy.

Industrial Production, Capacity Utilization, and Manufacturing Outlook

Industrial production and capacity utilization data for July will be released on Wednesday.

Industrial production experienced a 0.5% decline in May and a 0.5% decline again in June, marking the second consecutive monthly decrease. Capacity utilization dropped from 79.4% to 78.9% in June, surpassing expectations for a decline.

For July, industrial production is expected to rebound with a 0.3% increase, and capacity utilization is expected to rise slightly from 78.9% to 79%.

The New York Fed Empire State Manufacturing Index for August, indicating the direction of the manufacturing sector, will be published on Tuesday. The Empire State Manufacturing Index fell from 6.6 in July to 1.1 in August, signaling a continuation of growth in the manufacturing sector but at a slower pace.

The index is expected to drop to -0.75 in August, indicating a return to negative territory and implying contraction in the manufacturing sector.

Retail Sales and Employment Data

Retail sales data for July, which offers signals about domestic demand, will be released on Tuesday.

Retail sales increased by 0.2% in June, marking the third consecutive monthly increase but a slower pace compared to the 0.5% rise in the previous month. Core retail sales, excluding automobiles, gasoline, food, and building materials, increased by 0.6%, double the growth rate of the previous month.

These figures indicated that consumer spending resilience persisted despite tightening financial conditions and slowing inflation rates.

For July, retail sales are expected to accelerate from a 0.2% increase to 0.4%, and core retail sales are expected to slow slightly from 0.6% to 0.5% while maintaining a strong trajectory.

Regarding employment data, initial jobless claims data for the week will be released on Thursday.

Last week, initial jobless claims increased from 227,000 to 248,000, surpassing expectations (230,000), and reaching the highest level in the past five weeks. However, the numbers still remained at historically low levels, suggesting a tight labor market.

The expectation for the upcoming week is for initial jobless claims to remain around 240,000, indicating a continuation of the low levels and maintaining the picture of a tight labor market.

Housing Market

From the housing market, housing starts and building permits data for July will be released on Wednesday.

After the Federal Reserve’s rate hikes and the resulting tightened financial conditions, the housing market showed signs of weakening. In June, housing starts dropped by 8%, and building permits declined by 3.7%.

For July, housing starts are expected to rebound with a monthly increase of 0.8%, and building permits are anticipated to rise by 1.9%, partially recovering from the previous declines.

Manufacturing, GDP Growth, and Inflation Indicators

On the European front, upcoming economic data will shed light on manufacturing trends, GDP growth, and inflation dynamics in the Eurozone and the UK. Additionally, these indicators will influence the monetary policies of the European Central Bank (ECB) and the Bank of England (BoE).

Eurozone Manufacturing and Q2 GDP Growth

In the Eurozone, the industrial production data for June will be followed on Wednesday in terms of the trend of production.

Industrial production in the region had continued its partial recovery with a 1% increase in April and a 0.2% increase in May after experiencing a sharp 4.4% decline in March on a monthly basis. However, on an annual basis, it had shifted from a slight 0.2% increase in May to a 2.2% decrease.

It is expected that in June, the growth rate of industrial production will slow down from 0.2% to 0%, indicating a stagnant trend.

Additionally, revised GDP growth figures for the second quarter of the year in the Eurozone will be announced on Wednesday.

After contracting by 0.1% in the last quarter of the previous year, the economy of the region had shown stagnant growth of 0% in the first quarter of this year, indicating recovery from the recession.

Eurozone and UK Inflation Indicators 

Final July Consumer Price Index (CPI) figures for the Eurozone, as well as July CPI data for the UK, will provide crucial insights into inflation trends.

According to preliminary data, headline CPI in the Eurozone recorded its first decrease in the past six months, falling by 0.1% on a monthly basis in July following a 0.3% increase in June, aligning with expectations. On an annual basis, it had decreased from 5.5% to 5.3%, maintaining its lowest levels since January 2022. However, core CPI in the Eurozone showed a decrease of 0.1% on a monthly basis in July after a 0.4% increase in June, below expectations. On an annual basis, it remained at 5.5%, similar to the previous month, thus maintaining a level close to the record level of 5.7% reached in March, with expectations slightly lowering to 5.4%. Consequently, core CPI surpassed headline CPI for the first time since 2021.

In the UK, the monthly increase rate of headline CPI slowed down from 0.7% to 0.1% in June, below expectations of 0.4%. On an annual basis, it decreased from 8.7% to 7.9%, marking the lowest level since March 2022, with expectations of a decrease to 8.2%. The monthly increase rate of core CPI in June also slowed down from 0.8% to 0.2%, below expectations of 0.4%. On an annual basis, it decreased from the highest level since March 1992, 7.1%, to 6.9%, aligning with expectations of remaining at 7.1%.

For July in the UK, a monthly decrease of 0.5% is expected for headline CPI, and on an annual basis, a decrease from 7.9% to 6.8%. Core CPI is expected to slightly decrease from 6.9% to 6.8% on an annual basis.

Eurozone Trade Balance

Trade data for the Eurozone in June will be announced on Thursday. After a trade surplus of 11.7 billion Euros in April, it had a limited surplus of 0.3 billion Euros in May due to a significant drop in imports.

German Economic Sentiment

On Tuesday, the ZEW current conditions and expectations indices for August will shed light on the course of the economy and the future in Germany.

In July, the ZEW current conditions index had fallen from -56.5 to -59.5, below expectations, and the expectations index had fallen from -8.5 to -14.7, above expectations, reaching the lowest levels since December 2022 and maintaining a declining trend in the contraction zone for the last three months.

Norwegian Central Bank Interest Rate Decision

The decision on the interest rate by the Norwegian Central Bank will be closely watched. Following a rate hike in the previous meeting, the market awaits the bank’s decision for potential further rate adjustments. The bank’s previous communication highlighted the importance of controlling inflation and the likelihood of additional rate hikes.

 The market expectation for this week’s meeting is for the bank to increase the policy rate by 25 basis points to 4%.

China’s Economic Indicators: July Data Release

On the Asian front, data for July regarding industrial production, retail sales, and fixed asset investment in China, which will provide information about the course of economic activity, will be announced on Tuesday.

Mixed Signals from June Data

Economic activity data for June in China presented a mixed picture. Retail sales, an indicator of domestic demand, slowed down from 12.7% to 3.1%, exceeding expectations, while the growth rate of fixed asset investments decreased from 4% to 3.8%, with a more limited slowdown than expected. However, the growth rate of industrial production increased from 3.5% to 4.4%, surpassing expectations of a slowdown.

Anticipated July Figures

In July, it is expected that the year-on-year growth rate of industrial production will maintain a level of 4.4%.

The growth rate of retail sales is expected to increase from 3.1% to 4.5%, and the growth rate of fixed asset investments is expected to remain at a level similar to the previous month, around 3.8%.

While the Chinese government has set a growth target of around 5% for this year, market players assess that the Chinese economy requires further stimulus.

Japan’s Q2 Economic Performance: Preliminary GDP Data

On Tuesday, preliminary GDP growth data for the second quarter of this year in Japan will be followed. After the Japanese economy showed 0.1% growth on a quarterly basis in the last quarter of the previous year, driven by positive effects from public spending and net exports, along with weak consumer spending and a decline in investments, it demonstrated 0.7% growth in the first quarter of this year due to the recovery in consumer spending and investments. The annualized quarterly growth rate had risen from 0.4% to 2.7%.

According to preliminary data, it is expected that the country’s economy will exhibit growth of around 0.8% on a quarterly basis in the second quarter, with an annualized quarterly growth rate rising from 2.7% to 3.1%.

Reserve Bank of New Zealand: Interest Rate Decision 

On Wednesday, the interest rate decision of the Reserve Bank of New Zealand will be followed.

In its last meeting, the bank had paused its series of interest rate hikes that had been ongoing since October 2021, keeping the policy rate stable at 5.50%, in line with expectations. The bank stated that the current interest rate level was as anticipated and appropriately constrained spending and inflation pressures.

In this context, it is expected that the bank will maintain the policy rate at 5.50% in this week’s meeting.