Weekly Wrap – Geopolitics, Stats and the G20 Summit Provided Direction

While the stats were on the lighter side in the week, there was plenty for the markets to digest including initial updates from the G20 Summit…
Bob Mason
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The Stats

It was a relatively quiet week on the economic calendar in the week ending 28th June,

A total of 51 stats were monitored throughout the week.

Of the 51 stats, 22 came in below forecasts, with just 16 economic indicators coming in ahead of forecast. 13 stats were in line with forecasts in the week.

Looking at the numbers, 26 of the stats reflected a deterioration from previous figures. Of the remaining 25, 16 stats reflected an upward trend.

While the economic data was skewed to the negative, sentiment towards Iran, the G20 Summit and economic outlook drove the Greenback and the majors. The U.S Dollar Index (“DXY”) slipped by 0.09% in the week to 96.130.

Out of the U.S

On the data front, key stats were skewed to the negative once again in the week.

On Wednesday, Core Durable Goods orders rose by 0.3%, month-on-month in May, reversing a 0.1% fall in April. The more influential Cap Goods Ship non-Defense ex-air also provided support, rising by 0.7% off the back of a 0.4% rise in April.

The only other positive came on Friday, with the Michigan Consumer Sentiment Index. An upward revision from a prelim 97.9 to 98.2 was positive for June, though the Index was still down from May’s 100.0.

On the negative side, consumer confidence tumbled in June, with the CB Consumer Confidence Index falling from 131.3 to 121.5.

Ahead of the G20 Summit, the U.S goods trade data also disappointed, with the deficit widening from $70.92bn to $74.55bn.

At the end of the week, the Chicago PMI also surprised, with the PMI falling from 54.2 to 49.7.

Also on the negative side for the Greenback on Friday were inflation figures. The FED’s preferred Core PCE Price Index rose by 1.6% year-on-year, which was well below the FED’s 2% objective.

Personal spending rose by 0.4% in May, which was in line with forecast, whilst easing from a 0.6% rise in April.

Off less influence, though needing some consideration was a 7.8% slide in new home sales in May. The slide came off the back of a 3.7% fall in April and, when coinciding with the fall in consumer confidence, could be a red flag…

Outside of the stats, FED Chair Powell spoke early in the week, dashing hopes of a near-term FED rate cut, leading to some upside in the Dollar on Tuesday.

In the end, it all boiled down to market sentiment towards the G20 Summit and whether Trump and Xi could find common ground.

In the equity markets, the U.S majors saw red for the 1st time in 4-weeks. The Dow led the way down, falling by 0.45%. The NASDAQ and S&P500 fell by 0.32% and by 0.29% respectively.

Out of the UK

It was a relatively quiet week.

On the economic calendar, key stats were limited to finalized 1st quarter GDP, business investment and current account figures.

While GDP numbers were in line with prelim, affirming 1.8% growth year-on-year, business investment growth was revised down from 0.5% to 0.4%.

The numbers had a muted impact on the Pound, however, with the UK leadership race and sentiment towards monetary policy the key drivers.

On the policy front, BoE Governor Carney spoke of the likely need to cut interest rates should Britain tumble out of the EU without a deal.

The leadership race continued to suggest that Boris Johnson will take the top spot and that certainly raises the stakes for a no-deal Brexit.

The Pound ended the week down by 0.32% to $1.2696.

For the FTSE100, a weaker Pound and rise in commodity prices provided support, with the index up by 0.24% for the week.

Out of the Eurozone

It was also a particularly busy week.

Business and consumer confidence figures were in focus on the week. Out of Germany, the IFO Business Climate Index slipped from 97.9 to 97.4, with falling new orders weighing. While the headline figure disappointed, sentiment towards current conditions improved marginally in June.

German consumer confidence also deteriorated, with the GfK consumer climate survey easing from 10.1 to 9.8.

The EU Commission released its business confidence figures on Thursday, which also disappointed. The Business Confidence Indicator fell from 0.3 to 0.17.

On the positive side were prelim June inflation figures for Germany, France, Italy, and the Eurozone. The Eurozone’s annual rate of core inflation accelerated from 0.8% to 1.1% in June.

Outside of the numbers, market sentiment towards rising tension in the Middle East and the G20 Summit also provided direction.

In the equity markets, a Friday rally pulled the majors into the green for the week. The DAX30 rallied by 1.04% on Friday to end the week with a 0.48% gain. The CAC40 ended the week up by 0.19%. It was a particularly bullish month, despite the curve balls, with the CAC40 and DAX30 gaining 6.36% and 5.73% respectively.

The EUR ended the week up 0.04% to $1.1373 against the Dollar.

Elsewhere

It was another bullish week for the Aussie and Kiwi Dollars.

The Aussie Dollar rose by 1.36% to $0.7020, while the Kiwi Dollar rallied by 1.96% to $0.6718.

For the Aussie Dollar

The gains came in spite of the economic calendar being on the quieter side in the week.

Stats were limited to May private sector credit figures on Friday, which rose by just 0.2%, month-on-month.

Of greater influence through the week was rising commodity prices and some positive chatter on trade talks in the run-up to the G20 Summit.

For the Kiwi Dollar

Economic data included May trade figures and June business confidence figures that provided direction on Tuesday and Friday.

Year-on-year, New Zealand’s trade deficit narrowed from NZ$5.56bn to NZ$5.49bn, while the ANZ Business Confidence Index fell from -32 to -38.1.

On the monetary policy front, the RBNZ delivered it’s June monetary policy decision, with the talk of further rate cuts ahead having a muted impact on the Kiwi on Wednesday.

Better than expected trade figures amidst the ongoing U.S – China trade war was a positive, with rising commodity prices supporting.

For the Loonie

It was a relatively busy week.

April wholesale sales figures provided support on Tuesday, with sales rising by 1.7%, month-on-month, off the back of a 1.4% rise in March.

On Friday, GDP numbers were also positive. Month-on-month, the economy grew by 0.3% in April, coming in ahead of a forecasted 0.1% rise. Year-on-year, the economy grew by 1.5%, which was in line with forecast.

On the negative side was a 2.3% slide in the RMPI in May, partially reversing a 5.7% increase in April.

Outside of the numbers, the Bank of Canada released the Business Outlook Survey, which also provided the Loonie with support.

The BoC noted an improvement in business sentiment in the 2nd quarter, the outlook for hiring and business investment on a more positive footing.

Outside of the stats, rising tensions in the Middle East provided the Loonie with plenty of support. WTI and Brent ended the week up by 1.81% and 2.07% respectively.

The Loonie ended the week up 0.96% to C$1.3095 against the Greenback.

For the Japanese Yen

May retail sales figures on Thursday and industrial production and inflation figures on Friday delivered mixed results.

On the positive side were retail sales and industrial production figures. Retail sales increase by 1.2% in May, following on from a 0.4% rise in Apri. More impressive was a 2.3% jump in industrial production in May.

On the negative side, inflationary pressures eased in June, with Tokyo consumer prices rising by just 0.9% year-on-year. In May consumer prices had increased by 1.1%.

Outside of the numbers, geopolitical risk continued to be a key driver. Both Iran and the G20 Summit were in focus.

For the week, the Japanese Yen fell by 0.49% to ¥107.85.

Out of China

There were no material stats to influence the global financial markets.

Concerns on Friday over the chances of a resolution to the U.S – China trade war weighed on the CSI300. The index fell by 0.24% on Friday to end the week down by 0.22%. It was a bullish month, however, with the Index up by 5.39%.

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