Global Stock Rally Peters Out

Global stock market recovery runs out of steam. Asian markets closed mixed, with Nikkei and Topix weighed down by a stronger Yen, after dovish leaning FOMC minutes weighed on the dollar. Hang Seng and ASX also closed in the red. In Europe, DAX and FTSE 100 are slightly down on the day, with the latter ignoring slightly better than expected retail sales numbers. U.S. stock futures are also down, as are oil prices, which are trading at USD 46.60 per barrel.

Eurozone trade surplus widened to EUR 22.3 billion in June, from EUR 19.0 billion in the previous month. This brought the total for the second quarter to EUR 60.1 billion, from EUR 54.8 billion. This points to a positive contribution from net exports to overall growth in the first quarter, although the numbers are nominal of course and don’t consider currency moves and changes in import prices in particular. And while there are no full details for second quarter GDP yet, the German statistics office report that at least for Germany net exports detracted from growth as real imports rose strongly. So, the Eurozone numbers are also to be treated with caution as currency moves mask underlying developments.

Eurozone HICP Inflation was Confirmed at 1.3% in July

Eurozone July HICP confirmed at 1.3% year over year, as expected and unchanged from June. Core inflation was confirmed at 1.2% year over year, up from 1.1% year over year in June. Headline rates remain far below the ECB’s upper limit for price stability and with the EUR turning out stronger than the ECB’s June projections assumed, the chances are that the ECB will once again have to revise down its inflation forecast with the September updated. With geopolitical risks as well as Brexit still hanging over the outlook the data will do little to convince Draghi to commit too early to a full phasing out of QE.

Australia employment grew 27.9k in July after a revised 20.0k gain in June. The increase in July mildly overshot expectations, but the details were less encouraging. Notably, full time employment retreated 20.3k after a revised 69.3k gain. Part time jobs drove total employment gains in July, rebounding 48.2k after a slightly revised 49.3k decline. The unemployment rate slipped to 5.6% in July from a revised 5.7% in June. Employment growth has picked-up momentum this year, but wage growth remains weak. The wage price index, released Wednesday, grew at a 1.9% year over year pace in Q2, matching the growth rate in Q3 and Q4 of 2016, and Q1 of this year.