Stock Report For Week Ended July 15, 2016
Global equities rallied this week on hopes for further global monetary and fiscal stimulus. The Bank of England did not cut rates this week but indicated that an easier policy is likely, perhaps as soon as next month, while Japan’s Prime Minister Abe called for a ¥10 trillion fiscal stimulus package to boost domestic demand. Oil prices edged up on the week, with West Texas Intermediate crude rising to $46.12 per barrel from $45.59 a week ago. Global Brent crude rose to $47.91 from $46.85. The Chicago Board Options Exchange Volatility Index (VIX) declined to 12.52 from 13.68 last week while the yield on the US 10-year Treasury note rose to 1.58% from 1.40%.
GLOBAL ECONOMIC NEWS
June US retail sales brisk
Retail sales in the United States rose 0.6% in June while May sales were revised down to a 0.2% rise from an initially reported 0.5%. The retail sales report dovetailed with this week’s Beige Book from the US Federal Reserve, which said that economic activity increased at a modest pace in most regions. The S&P 500 Index set intraday records each day this week, the first time that has happened since 1998.
UK Conservatives settle on new leader
Theresa May was appointed Conservative Party leader and prime minister of the United Kingdom this week after her sole remaining challenger, Andrea Leadsom withdrew from the race. May quickly assembled a cabinet with the intention of moving forward with the UK’s exit from the European Union. Her most notable cabinet appointment was the voluble Boris Johnson as foreign secretary.
Japan seeks to spur growth again
Japanese prime minister Shinzo Abe, after securing a victory in upper-house elections last weekend, laid out a plan to boost domestic demand with a fresh ¥10 trillion ($100 billion) fiscal stimulus. Talk of even more aggressive plans boosted equity markets and undermined the yen. Also boosting Japanese markets this week was a 90% jump in shares of Nintendo after its Pokemon Go game became an international sensation.
Bank of England holds fire
In the wake of the Brexit vote, markets were hoping for the first rate cut in seven years on Thursday, but the Bank of England instead held policy steady. It did indicate that easier policy is likely in August. The pound recouped some of its recent losses to end the week near $1.3275.
China maintained 6.7% growth rate in Q2
Considerable fiscal stimulus helped China maintain its 6.7% growth rate in the second quarter of the year. Headwinds to growth are expected in the second half of the year as fiscal stimulus is pared back. Earlier this week, an international tribunal rejected Beijing’s claims to the South China Sea.
Irish GDP jumps
Ireland’s 2015 gross domestic product figures were revised this week, and lo and behold, the rate of growth was revised to 26.3% from an earlier 7.8% estimate. Why the jump? The prime suspects are a spate of corporate inversion deals in which for tax purposes foreign firms move their headquarters or aircraft leasing assets and transfer their patents to Ireland. Analysts warn that the growth rate masks the true performance of the Irish economy. Stripping out the tax-related moves, the economy probably grew more like 4.5%. Still not a bad showing in a slow-growth world.
France hit by terror attack again
84 people were killed and over 200 injured in Nice on Thursday as a gunman drove a truck into a crowd watching Bastille Day fireworks along the French Riviera. The attack is the seventh in France since January 2015. France was just preparing to lift its state of emergency put into place in the wake of November attacks in Paris.