A review of the week past and the week ahead

Charts (5)

What mattered last week:

  • The S&P500 closed the week up over 1.80% supported by good earning results.
  • Despite the “old news” that U.S. GDP plummeted 9.5% q/q or by almost 33% annualised.
  • Supported also by signs that new coronavirus cases in the U.S. are slowing as restrictions and the wearing of masks appear to be working.
  • Soothing/dovish words from the Fed as it remains committed to doing whatever it takes to support the recovery.
  • Volatility, as measured by the VIX index, closed slightly lower at 24.
  • U.S. 10-year yields closed lower near 0.53%.
  • Gold made new all-time highs, closing almost 4% higher for the week near U.S $1975.
  • Crude oil closed -2.47% lower, at U.S $40.27/bbl.
  • The ASX200 fell -1.60% closing at 5927.8 on indications the Melbourne lockdown will be extended.
  • In FX, the AUDUSD closed near .7150 as the U.S. dollar remained out of favour.

For the week ahead, the key events are:

A key focus for traders this week will again be on new Covid-19 cases in the U.S, Latin America, Europe and in Australia.

Australia: Balance of trade, retail sales, RBA interest rate meeting (Tuesday), housing finance (Wednesday), RBA Statement of Monetary Policy (Friday).

  • RBA interest rate meeting/SoMP (Tuesday/Friday): While no change in monetary policy is expected, the lockdown in Victoria as well as state border closures is likely to see a more dovish tone from the RBA this week.

New Zealand: Global dairy auction (Tuesday), employment (Wednesday), business inflation expectations (Thursday).

China: Caixin manufacturing PMI (Monday), Caixin services and composite PMI (Wednesday), balance of trade, and foreign exchange reserves (Friday).

Japan: BoJ Kuroda speech (Wednesday).

U.S: ISM manufacturing (Monday), factory orders (Tuesday), balance of trade, ISM non-manufacturing (Wednesday), jobless claims (Thursday), employment (Friday).

  • Employment (Friday): The impact of COVID continues to play havoc with employment data. As a rough guide the market is looking for a rise in employment of approximately 2.25million in July and for the unemployment rate to fall back towards 10.5%.

June quarter earnings will continue this week with reports from companies including Walt Disney, Uber, and Bristol Myer.

Canada: Balance of trade (Wednesday), employment (Friday).

Euro Area: EA retail sales (Wednesday), German factory orders (Thursday), German industrial production, and balance of trade (Friday).

UK: BoE interest rate meeting and inflation report (Thursday).

  • BoE interest rate meeting (Thursday): The BoE is expected to keep rates unchanged at 0.1% and its asset purchase target at £754bn. It is also expected to retain the message that it “stands ready to take further action as necessary to support the economy.”

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