Weekly market recap

Your weekly global financial market newsletter

  • At the end of this week, we will again get closer to a possible answer as to when the US Fed plans to start easing monetary policy, and how many times it will actually cut rates this year. The core PCE price index will be known this Friday, with the forecast for the month up 0.2% and the year-over-year decline from 2.6% to 2.8%.
  • The last time the YoY Core PCE fell was in March, and since then it has held at 2.8%, the lowest since May 2021, when it rose from 1.9% to 3.1%. A lower than expected number would of course stir speculation around an early rate cut by the Fed. The current probability is around 60%, which is higher than it was at the end of May when it was around 50%.

Indices

Although the US stock markets were open for only four days last week, the S&P 500 and Nasdaq 100 indices again hit all-time highs during the week. Unlike in previous weeks, value titles fared better than growth titles. As a result, the DJIA posted its best weekly performance since May. The underperformance of the technology indices was mainly due to the correction in Nvidia, which lost ground on Friday and which has had a significant impact on the sector as a whole recently. However, other major tech stocks also lost ground. US markets on Friday saw the highest trading volume since 15th of March, mainly due to an event called triple witching, i.e. the expiry of stock options, stock index options and index futures options.

European equities took gains during the week, but Friday’s PMI data, showing a deterioration in business activity in the EU, ended up limiting the weekly gains significantly. The pan-European STOXX Europe 600 Index ended 0.79% higher, Germany’s DAX gained 0.90%, France’s CAC 40 Index put on 1.67%, and the UK’s FTSE 100 Index added 1.12%.

US30
+1.45%
US100
+0.21%
US500
+0.61%
GER30
+0.90%

Commodities

The price of oil strengthened during the week and reached seven-week highs thanks to several factors. One of the main factors affecting the price of oil over the long term is the ongoing geopolitical tensions in the Middle East, where the Israeli offensive against Hamas terrorists and the ongoing efforts to free hostages continue. On Thursday, in turn, reports on US crude oil inventories showed a drawdown of 2.547 million barrels, beating forecasts of a 2 million barrel drop. US gasoline and distillate stocks also experienced surprise drawdowns, indicating robust energy demand. But on Friday, price gains stalled, again due to the dollar, whose strengthening may negatively impact global oil demand.

US Natural Gas weakened for the second week in a row, and its price hit its lowest level since early June. US gas production rose to an average 98.2 billion cubic feet per day in June, climbing from a 25-month low in May. This is due to both the need to meet demand from electricity generators due to increased air conditioner use, and the significant price increases in April and May. However, the hot weather forecast points to a steadily rising demand for power.

Gold
-0.44%
Silver
-0.01%
BRENT
+2.97%
NATGAS
-5.62%

Forex

The weakest currency among the majors this week was the Japanese yen, which again approached the 160 yen per dollar level, which saw intervention by the Japanese government in April. When the government did so two months ago, the yen strengthened to as high as 151 yen per dollar, but the central bank’s reluctance to curb its massive government bond purchases and postponing the announcement of a plan to end them until the next meeting again led to a weakening of the Japanese currency. Top currency diplomat Masato Kanda may be talking about how he will instruct the BOJ to intervene in markets in the event of “excessive” moves in foreign exchange markets, but no one knows exactly what that means.

The U.S. dollar notched modest gains during the week, hitting seven-week highs. The dollar strengthened especially on Friday, when better-than-expected PMI data again raised speculation that the US central bank may not rush to cut interest rates. The dollar was also helped by the dovish stance of the Bank of England, and the fact that the ECB has already moved to cut rates, as have the Bank of Canada and the Swiss National Bank, which surprisingly cut rates for the second time in the past week.

EUR/USD
-0.09%
USD/JPY
+1.52%
GBP/USD
-0.35%
USD/CAD
-0.32%

Macro

US business activity saw its quickest growth in 26 months in June, according to preliminary PMI data from S&P Global, signalling a robust finish to the second quarter. The service sector spearheaded the upswing with support from manufacturing, although the latter’s recent resurgence has lost some steam.

The number of building permits issued in the US fell by 3.8% in May to an annualized rate of 1.386 million (April: -3% to 1.44 million), according to preliminary data. US construction starts fell 5.5% in May to an annualized pace of 1.277 million units (April: +4.1% to 1.352 million units). The Philadelphia Fed’s index of industrial activity fell to 1.3 points in June (estimate: 5 points, May: 4.5 points).

Eurostat confirmed the flash estimate published about two weeks ago, according to which inflation in the euro area rose to 2.6% in May. It was 2.4% in April. The annual rate of consumer price inflation in Britain fell to 2% in May from 2.3% in April, the UK Statistics Authority said on Wednesday. This brought inflation back to the central bank’s target for the first time in three years. The figure is in line with economists’ expectations and marks a noticeable drop in inflation from a 41-year high of 11.1%.

As expected, the Bank of England left its base rate unchanged at 5.25%, a 16-year high, at its June monetary policy meeting. Some members of the monetary committee said their decision not to cut rates was now “finely balanced”.

The pace of business activity growth in the eurozone eased in June. The preliminary composite purchasing managers’ index showed this. The indicator fell to 50.8 points from 52.2 points in May. The result is a surprise, as the indicator was expected to rise to 52.5 points. The sub-indicator for the manufacturing sector fell to 45.6 points (estimate: 47.9 points) from 47.3 points and the PMI for the services sector fell to 52.6 points (estimate: 53.5 points) from 53.2 points.

What to watch out for this week

  • Inflation will take the spotlight next week, with markets looking ahead to a reading on the core personal consumption expenditures (PCE) price index, which is widely seen as the Federal Reserve's preferred inflation gauge. Economists expect core PCE to rise 0.1% MoM and 2.6% YoY.
  • Tuesday will be marked by consumer confidence in the US according to the Conference Board. Adjusted for seasonality, the market expects a slight drop from 102 to 100 points. On Wednesday, we will learn the number of new home sales, which should increase slightly. U.S. economic growth will also be in focus on Thursday, as the second estimate of Q1 gross domestic product growth is scheduled for release.
  • Important regional PMIs including the Dallas Fed Manufacturing Index, Richmond Fed Manufacturing Index, Chicago Fed National Activity Index, and Kansas Fed Manufacturing Index, will also be released.
  • On Wednesday, we'll review the Gfk consumer sentiment survey in Germany. It's anticipated to remain negative (-20.0 points), yet since February, the rating has been gradually climbing to its highest level in two years.

Disclaimer

All information provided on this site is intended solely for the study purposes related to trading on financial markets and does not serve in any way as a specific investment recommendation, business recommendation, investment opportunity, analysis or similar general recommendation regarding the trading of investment instruments. The content, in its entirety or parts, is the sole opinion of FTMO and is intended for educational purposes only. The historical results and/or track record does not imply that the same progress is replicable and does not guarantee profits or future profitable trading records or any promises whatsoever. Trading in financial markets is a high-risk activity, and it is advised not to risk more than one can afford to lose!