Equity markets last week showed mixed dynamics. US benchmarks finished the five-day week on a positive note, received support from the US labor market data. After a disastrous report in May, June pleased sharp increase in the number of new jobs (287 thousand.). As a result, Dow Jones finished the week higher by 0.96%. NASDAQ added 1.87%. The German DAX 30, despite Friday’s rise, was not able to fully redeem the fall and closed with losses in the amount of 1.19%. The British FTSE (Z) is held in the area earlier highs: + 0.25% for the past week. Japan‘s Nikkei continues to remain under pressure, losing 1.34%, largely due to the strengthening of the yen.
In the currency market the British Pound continues to mostly remain under pressure. The pair GBP / USD lost 2.37%. Quotes updated for at least 31 years old, down to the level of 1.2795. The reasons for the same: the expectation of new monetary stimulus from the Bank of England to neutralize Brexit consequences. But the New Zealand and Australian dollars were able to harden. The theme of risk aversion receded temporarily, helping couples to grow, respectively, 1.78% and 1.06%. At the same time, AUD / USD has received additional support from the Reserve Bank of Australia‘s decision to keep the rate unchanged.
London Brent said 2-month low, dropping to the level of 46.14 dollars per barrel, and the closure of the week only marginally restored losses. At the end of five days the energy carrier is losing 8.08%. An additional factor was the pressure and the data from Baker Hughes, reflecting the continued growth in the number of drilling rigs operating in the US (+ 10 units). Precious metals continue to rise against the background of the conservation risks for the global economy, despite the strong statistics from the US. Gold (XAU / USD) increased by 1.89%. Silver (XAG / USD) added 2.52%.
Chart of the week:
The economic data of the last week:
- Monday. UK: June index of business activity in the construction sector (PMI) 46,0 against the forecast of 50.6
- Tuesday. Reserve Bank of Australia kept rates at the same level (1.75%)
- Wednesday. US: June index of business activity in the services sector (ISM) 56,5 – more than the forecast of 53.3. employment component rose to 52.7 from 49.7
- Thursday. UK: May industrial production -0.5%, + 1.4% – higher than forecasts
- Friday. US: in June, the number of new jobs created outside the agricultural economic sector 287,000 vs. 175 thousand.
The forecast for the week July 11 – July 15
Last week, US statistics clearly pleased that supported the US stock indices, as at this stage the market is well aware that the US Federal Reserve will not rush to increase rates due to the risks that brings to the global economy Brexit. The coming week will not be so interesting from the point of view of the planned publication of a report – only on Friday, there are data on retail sales, consumer price index and a report on industrial production. Strong statistics may well give new impetus to the growth of stock indices. In addition, during the week perform several members of the Federal Reserve. Comments, which will confirm the regulator mood to wait for the rate increase, will also support risky assets. Dow Jones (YM) may try to continue to grow at 18110. NASDAQ district level (NQ) is able to rise to the level of 4550.40 area with a further target at 4600.00.
Japanese Nikkei (NKD) remains under pressure, largely due to the appreciation of the yen, which is held at the level of 100.00 area. However, the beginning of the week for the index may be a positive. July 10 parliamentary elections will be held in Japan. Quite a high probability that they will win the Liberal Democratic Party of incumbent Prime Minister Abe. He has repeatedly spoken about the need for additional stimulation to trigger the growth of consumer demand in the country. Thus, it increases the chances of victory in the new monetary easing steps that will support the Nikkei, the benchmark aiming to return to the level of 15830.
Commodity and raw market
Oil a large part remained under pressure last week. All attempts to develop a movement in the level of 50.00 area proved unsuccessful. A key factor of pressure energy, apparently, are concerns that demand will decline. In Asia, it has recorded such dynamics. In Europe, such a threat are the consequences Brexit. It should be noted that, in general, statistics (data on commercial stocks and production volumes in the United States) was decent. Moreover, the production decline was the highest since 2013 and amounted to 194 thousand barrels. It seems that investors in anticipation of the publication of data on the global supply and demand, which is scheduled for 12 July prefer refrain from buying. Although in general, the report may bring good news. The fact that in June there were a number of problems associated with the supply and production (fires in Canada, the rebel attack in Nigeria, tension in Libya). But some of these factors have already exhausted itself, except for the situation in Nigeria, which will increase the offer again. Thus, while not sufficient, as the factors for the impressive growth, and to fall below the level of 45.00. This means that in the coming week Brent can store a range of 45.00 – 53.00.
Next week will see the first after the decision of the meeting of the Bank of England Brexit. Earlier, on July 5, the British regulator lowered the capital requirements for banks, which, in fact, was an attempt to stimulate lending. Almost immediately after the announcement of a referendum of the British market started to be put on the fact that the country’s central bank will pursue a stimulating monetary policy. Of course, yet the consequences of the decision have not yet manifested themselves. However, to completely rule out the possibility that the regulator will act “in advance“, perhaps, not worth it. Any of its action in the direction of easing monetary policy may have on a pair of GBP / USD further pressure, aiming it to move in a minimum area of 1.2795 last week. If this does not happen, and the minutes of the meeting will not be enough pessimistic, the pound may try to develop a correction in the area of 1.3100 level.
Warning: Profitability in the past does not mean profitability in the future. Any projections are for information only and does not guarantee a result.