What mattered last week and a preview of the week ahead 8th July

What mattered last week:

  • The S&P 500 rose +1.30% after the U.S. and China agreed on a trade war truce and to return to the negotiating table for trade talks.
  • Weak economic data in the early part of the week drove the yield on U.S. 10-year government bonds to 1.94% only to close the week back above 2.00% after a stronger than expected U.S. jobs report.
  • In Europe, Christine Lagard was nominated to head the ECB and is likely to follow in the dovish footsteps of Mario Draghi.
  • In Australia, the RBA cut the cash rate to 1.00%, the first time it has delivered consecutive cuts since 2012.
  • Personal tax cuts promised in the Federal election were confirmed by the Australian Parliament.
  • All of which propelled the ASX200 another 2% higher to close above 6751 and just 100pts below its all-time high from 2007.
  • In FX, the AUDUSD lost ground against the U.S. dollar after the stronger expected U.S. jobs report, and trade truce reduced the likelihood of a 50bp cut at the Feds July meeting.

For the week ahead, the key events are:

Australia: NAB business confidence (Tuesday), Westpac consumer confidence (Wednesday), Home loans (Thursday).

  • NAB business confidence (Tuesday): After a sharp bounce last month to +7 post the Federal election result, business confidence is expected to fall back towards +2, reflecting weak business conditions and consumer confidence.

New Zealand: Business NZ PMI (Friday).

China: CPI and PPI (Wednesday), balance of trade, new yuan loans, total social financing (Friday).

Japan: Current account and machinery orders (Monday), PPI (Wednesday).

U.S.: Jolts job openings (Wednesday), FOMC minutes and CPI (Thursday).

  • FOMC minutes (Thursday): The minutes from the Fed’s last meeting are likely to confirm an easing bias.

Fed speakers on the wires this week include Powell, Quarles, Williams and Kashkari.

Canada: Housing starts and building approvals (Tuesday), Bank of Canada interest rate decision (Thursday).

  • Bank of Canada Meeting (Thursday): The BoC is expected to keep the cash rate unchanged at 1.75% and reiterate that the current accommodative stance is appropriate and that any future move will be data dependent.

Euro Area: German balance of trade and industrial production (Monday), EA industrial production (Friday).

UK: Balance of trade, GDP, industrial production and construction output (Wednesday).


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