- US stock market performance: Nasdaq and S&P 500 decreased, while Dow Jones
- The Dollar index (DXY) decreased by 2.3%.
- Brent crude oil prices increased by 1.8%.
- US 10-year treasury yield declined by 23 basis points to 3.83%.
- US 2-year treasury yield decreased to 4.77% after an 18 basis points drop.
- Michigan Consumer Confidence Index for July surpassed expectations, reaching the highest level since September 2021.
- Industrial production in the US showed a surprise decline of 0.2% in May.
- Manufacturing production increased by 0.1%, while mining and utilities production declined.
- Capacity utilization rate in May slightly declined to 79.6%.
- New York Fed Empire State manufacturing index rebounded in June but is expected to decline in July.
- Retail sales in the US increased by 0.3% in May and are expected to rise by 0.5% in June.
- US housing starts, building permits, and existing home sales data for June are expected to decrease.
- Weekly initial jobless claims remained at low levels, indicating a tight labor market.
- ECB President Lagarde’s speeches will be closely watched for monetary policy signals.
- Eurozone’s CPI increased from 0% to 0.3% on a monthly basis in June, while the annual rate decreased.
- UK’s CPI for June slowed down on a monthly basis but remained high on an annual basis.
- Germany’s PPI in June is expected to decline on a monthly and annual basis.
- Eurozone’s consumer confidence index remained negative in June due to the impact of ECB’s interest rate hikes.
- People’s Bank of China is expected to keep interest rates unchanged.
- Central Bank of Russia is expected to increase the policy rate by 50 basis points to 8%.
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US Market Outlook and Economic Events
US Stock Market Performance: Nasdaq and S&P 500 Decrease, Dow Jones Rises
Last Friday, the Nasdaq index closed the day with a 0.18% decrease, while the S&P 500 index recorded a 0.10% decline. However, the Dow Jones index ended the day with a 0.33% increase.
The Dollar index (DXY) completed the week at 99.9, marking a 2.3% decrease. Brent crude oil prices ended the week at $79.9 per barrel, showing a 1.8% increase.
In the US, the 10-year treasury yield declined by 23 basis points to 3.83% last week, while the 2-year treasury yield, which is more sensitive to monetary policy developments, closed at 4.77% after an 18 basis points decrease.
US Economic Indicators: Michigan Consumer Confidence Index and Industrial Production
The preliminary consumer confidence index data for July from the University of Michigan in the US came in at 72.6, surpassing expectations (65.5) significantly. This increase can be attributed to the ongoing easing of inflation and the stable labor market conditions, reaching the highest level since September 2021.
When examining the details, the sub-index for current conditions rose from 69 to 77.5 in July, reaching the highest level since October 2021. The expectations sub-index also increased from 61.5 to 69.4, reaching the highest level in the past two years.
Turning to the economic agenda, Tuesday will see the release of industrial production and capacity utilization rate data for June in the US, providing insights into the trend of production.
Industrial production showed a surprise decline of 0.2% in May after a 0.5% monthly increase in April, with expectations suggesting a slowdown to 0.1% monthly growth.
Manufacturing production increased by 0.1% on a monthly basis, while mining sector production declined by 0.4% and utilities production decreased by 1.8%.
The capacity utilization rate slightly declined from 79.8% to 79.6% in May, contrary to expectations of remaining stable. In June, it is expected that industrial production will remain stagnant with a 0% monthly growth rate, and the capacity utilization rate will decrease slightly from 79.6% to 79.5%.
On Monday, the New York Fed Empire State manufacturing index for July, which provides a signal about the state of manufacturing, will be monitored. In June, the index rebounded from -31.8 to 6.6, surpassing expectations, indicating a return to the growth zone. However, in July, it is expected to decline to -4.3, signaling a contraction in the manufacturing sector.
Retail Sales Data and Housing Market Updates in the US
Retail sales data for June, which provides signals about the course of domestic demand, will be released on Tuesday. Retail sales showed a 0.3% increase in May, surpassing expectations of a decline, indicating the resilience of consumer spending despite high inflation and rising interest rates. In June, retail sales are expected to increase by 0.5% on a monthly basis.
On Wednesday, housing starts, building permits, and existing home sales data for June, which provide an indication of housing demand for the future, will be followed. It is expected that the housing market data will weaken due to the tightening financial conditions following the Federal Reserve’s interest rate hikes. Accordingly, housing starts are projected to decrease by 10.2% on a monthly basis, building permits by 0.4%, and existing home sales by 1.2%.
In addition, the weekly initial jobless claims data, an indicator of the employment market, will be monitored on Thursday. The latest data showed a decrease from 249,000 to 237,000, remaining at low levels below historical averages, indicating a tight labor market.
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European Economic Outlook and Economic Events
ECB President’s Speech and Eurozone Inflation Data
Moving to the European economic agenda, the focus will be on the speeches by ECB President Lagarde and other ECB members throughout the week. These speeches will be closely watched for possible new signals regarding the central bank’s monetary policy.
Additionally, the final Consumer Price Index (CPI) data for June in the Eurozone will be released on Wednesday. According to preliminary data, the headline CPI increased from 0% to 0.3% on a monthly basis in June, in line with expectations, while the annual rate decreased from 6.1% to 5.5%.
The core CPI increased slightly from 5.3% to 5.4% on an annual basis, slightly below expectations of 5.5%. It is worth noting that the core CPI reached a record level of 5.7% in March.
German Producer Price Index (PPI) and Eurozone Consumer Confidence Data
On Thursday, Germany’s Producer Price Index (PPI) for June will be monitored. In May, the PPI experienced a 1.4% monthly decrease, reaching the lowest level since January 2021, primarily driven by a decline in energy prices.
In June, the PPI in Germany is expected to decline by 0.4% on a monthly basis and by 1% on an annual basis, continuing its downward trend.
Additionally, the flash consumer confidence index for July in the Eurozone will be released on Thursday. In June, the consumer confidence index improved slightly from -17.4 to -16.1 but remained in the negative territory due to the impact of the ECB’s continued interest rate hikes.
Bank of England (BOE) Policy Influencing Data: UK Inflation Figures
The United Kingdom (UK)’s CPI for June will be released on Wednesday, which will also shape the Bank of England’s monetary policy. In May, the monthly increase in the headline CPI in the UK slowed down from 1.2% to 0.7%, surpassing expectations, while the annual rate remained at 8.7%, in line with the previous month. The monthly increase in the core CPI in the UK also decelerated from 1.3% to 0.8%, exceeding expectations, while the annual rate increased from 6.8% to 7.1%, maintaining its high levels since March 1992.
In June, the headline CPI in the UK is expected to slow down to 0.4% on a monthly basis, and the annual rate to decrease from 8.7% to 8.2%. The core CPI in the UK is expected to remain at 7.1% on an annual basis, similar to the previous month.
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Asian Economic Outlook and Economic Events
Monetary Policy Decision in China and Russia: Central Bank Interest Rate Actions
Turning to the Asian economic agenda, on Thursday, the focus will be on the interest rate decision of the People’s Bank of China. Following signs of a slowdown in the Chinese economy, the central bank lowered the 7-day reverse repo rate from 2% to 1.90% last month, marking the first rate cut since August 2022. The reference rate for one-year medium-term lending facility (MLF) was also reduced from 2.75% to 2.65%. However, it is expected that the central bank will keep the 1-year and 5-year Loan Prime Rate (LPR) unchanged at this week’s meeting.
On Friday, the interest rate decision of the Central Bank of Russia will be followed. In the previous meeting, the central bank kept the policy rate unchanged at 7.50%, aligning with expectations and maintaining the current rate level for the sixth consecutive meeting. However, it is expected that the central bank will increase the policy rate by 50 basis points to 8% at this week’s meeting.