By Dean Popplewell
Last week saw global markets fluctuate between corporate earnings and geopolitical conflicts. There was an excess of negative news out of Israel and eastern Ukraine, with each region's headlines countering much of the decent US and euro quarterly earnings reports. On the whole, the reports were relatively good, despite the odd "curve ball" being thrown from a usually consistent heavy hitter [Amazon (NASDAQ:AMZN), McDonald's (NYSE:MCD)]. US housing data continues to be mixed, inflation subdued, while weekly claims took a massive dip, perhaps due to seasonality factors, but it certainly sets up the market's eagerness for NFP headlines this week.
In Europe, UK growth plods along surprisingly well and this despite domestic retail sales now a noted soft spot. Asian bourses handily outperformed their euro/US counterparts on the back of China's July flash PMI prints being rather strong. The Asian theme continues into this week, with China's markets
Against the major currencies, the US dollar had a good week. It appreciated across the board, with two minor exceptions. The Swedish krona continued to recover from the slide spurred by the larger than expected 50 bp rate cut at the start of the month. A few data points, including June manufacturing PMI and June CPI were stronger than expected, and helped ease stagflation fears.
The other exception was the Australian dollar, which sill managed to eke out a marginal gain after pulling back three-quarters of a cent in the last two sessions of the week to test $0.9400. The gains had been sparked by RBA minutes that did not show heightened concern about the Australian dollar, even though on its trade-weighted index was approaching the year's high and buying on against the yen (on carry ideas). The lower end of the Australian dollar's recent range comes in near $0.9330.
The UK is typically the first G7 country to report its official estimate of quarterly GDP figures. Today was the day. Growth in Q2 was spot on expectations, matching the 0.8% pace seen in Q1. The US will issue its first estimate next week.
Today's US June durable goods order report was somewhat disappointing. This stems from the weakness in non-defense shipments excluding aircraft (-1.0% after May's series was revised to -0.1% from +0.4%), which is used for GDP calculations. It was sufficient to push the US 10-year bond yield back below 2.50% and cap the apparently rate-sensitive dollar-yen rate just below JPY102.
The 1.4% rise in orders of the same (non-defense, excluding aircraft) was better than expected, but the May series was revised dramatically lower (to -1.2% from +0.7%). Nevertheless, durable goods shipments rose at a 4.1% annualized rate in Q2 after rising 2.2% in Q1, indicating they will