In-depth Analysis

Weekly Outlook 11-15 July

  • Volatility should remain high this week with the Q2 earnings season kicking off, major central banks’ meetings, and key data for policy makers.
  • On Tuesday 12, the Australian NAB Business Confidence and the German ZEW Economic Sentiment will be published.
  • On Wednesday 13, traders will watch out for the RBNZ and the BoC interest rate monetary policy meetings, the Chinese trade balance, the United Kingdom’s GDP, as well as the US CPI.
  • On Thursday 14, the employment figures for Australia, as well as the US PPI and initial jobless claims will be published.
  • On Friday 15, the most important data will be China’s Q2 GDP, US retail sales, and July Prelim UoM Consumer Sentiment will be released.

The financial markets had another tumultuous week last week, as worries of an upcoming recession caused a sell-off at the beginning of the week. With discounted prices and the prospect of an economic recovery in China, most indexes rebounded, plus a stronger than expected NFP report in June. While weekly performance for European indexes is mixed, it is globally positive for Wall Street. 

Last week was also marked by a rise in US bond yields with the yield on the benchmark 10-year Treasury and the 30-year Treasury rising above 3% and 3.25% respectively. The 2 and 5-year maturities are also ending the week higher, hovering respectively at around 3.10% and 3.12%. 

The spread between longer-duration Treasury yields and shorter-duration yields currently shows an inverted yield curve, which is often considered a sign of a weakening economy and an upcoming recession.

Other headlines of last week: 

  • The euro fell 3% against the dollar as low as $1.0071,
  • Oil prices tumbled below $100 per barrel before bouncing back, as growing fears of recession weighed on the demand outlook, 
  • Fears of a recession also mean lower demand for industrial metals, such as copper, and aluminum, for instance, which respectively reached their lowest level since November 2020 and July 2021.
  • And Gold prices lost almost 4% at around $1,727. 

This week will see the start of the earnings season and US consumer inflation data, as the two major catalysts that are probably going to trigger higher volatility in the week ahead. Let’s have a look at the upcoming major economic release for the week, commencing on the 11th of July.

Monday 11 July

The only news worth reporting for Monday 11th of July is that the Bank of England (BOE), Governor, Andrew Bailey, will be speaking. He is likely to comment on the current inflation situation and growth prospect, as well as future monetary policy actions, which might spark price movements on the GBP and UK indexes.

Tuesday 12 July

We’re going to start off in Japan with the Producer Price Index. Japan’s producer prices are expected to remain unchanged compared to last month with a yearly increase of 9.1% in June. 

Then in Australia, we’ll get the National Australia Bank (NAB) Business Confidence figures that reflect the current level of business conditions, sentiment and outlook in Australia. While overall conditions remain strong, they’ve been easing since April.

In Europe, investors will follow the German ZEW Economic Sentiment, which measures how optimistic experts and analysts are about the next six months’ economic outlook, not only about the economy, but also about inflation and interest rates, stock markets, as well as exchange rates.

Finally, we’ll have the latest crude oil inventory data in the United States from the American Petroleum Institute.

Wednesday 13 July

We’ll start the day with the interest rate decision from the central bank of New Zealand and rate statement, which will provide clues about growth and inflation prospects and how the RBNZ is going to adapt its monetary policy to respond to the situation. Analysts price in a rate hike of 2 to 2.50%

China will then publish its trade balance, which is expected to slightly slow down at 75.70B in June.

In Europe, the United Kingdom will publish its GBP figures.

Moving on to the United States and Canada in the afternoon, traders will watch out for inflation figures with the Customer Price Index, which is expected to increase to 8.8% in June compared to June 2021. The Bank of Canada will also release its interest rate decision and monetary policy report. Market participants price in a rate hike to around 2%.

Thursday 14 July

On Thursday, traders will mostly be looking at employment figures for Australia, with the employment change expected to drop to 25K and the unemployment rate to reach 3.8%. 

The most important data of the week for the American markets will be published on Thursday, that being that the monthly PPI is expected to remain at  0.8%. The Producer Price Index is the inflation figure monitored by the Fed to adjust its monetary policy with regard to its inflation goal of 2%. Initial jobless claims will also be published, but they’re expected to remain at 235K.

Friday 15 July

To finish the week, investors will get some very interesting data about China with the GDP figure for the second quarter and the industrial production. These economic releases will provide clues about how the biggest economy in the world is doing. 

American retail sales figures for the month of June will also be published on Friday – these are important figures as they are a gauge of consumer spending in the country, which is a significant component of the overall economic activity. As consumer spending is influenced by financial confidence, investors also need to follow the Prelim UoM Consumer Sentiment for July which is expected to slightly fall below 50.

Finally, remember that the earning season for Q2 will also begin this week, so do not hesitate to follow an earnings corporate calendar to be sure you’re up-to-date with the data being published during the week, as they can impact your trades. PepsiCo, Delta, JP Morgan, Morgan Stanley, Citigroup, UnitedHealth, and Wells Fargo are among the most important company announcements of this week.

 

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