RockCreek Daily Market Update

GLOBAL MARKET SNAPSHOT 

Equity Markets: 
Markets finished lower heading into the weekend. Italian stocks were the notable laggard today as Italian Prime Minister Matteo Salvini may call for snap elections as early as this weekend as tensions between coalition partners have been on the rise. U.S. stocks were caught in the crosscurrent between better than expected earnings and New York Fed President Williams walking back his dovish comments from yesterday. Williams mentioned after the close last night that his earlier comments weren’t meant to be interpreted as policy recommendations for the upcoming Fed meeting but were general academic findings. Only industrials and energy stocks were able to post gains while the laggards were utilities. Looking ahead to next week, we will receive the highly anticipated earnings reports from tech giants such as Facebook, Amazon and Google.

Bond Markets: 
With NY Fed President John Williams backtracking on yesterday’s comments, the front-end of the yield curve sold-off, while the long-end remained relatively unchanged. Adding to the hawkish shift in sentiment was St. Louis Fed President and FOMC member James Bullard commenting that he would support a 25 bps cut at the July meeting, but doesn’t believe a more aggressive move is needed at this time.

Currency Markets: 
The U.S. dollar index increased +0.4% as the greenback recouped yesterday’s losses with fairly uniform appreciation seen across the G10.  

Commodity Markets:  
The Bloomberg Commodities Index rose +0.6% as energy and agriculture broke this week’s losing streak. The energy market remained volatile as Iran denied reports that the U.S. had shot down one of its drones, while the U.K. investigates Iran’s seizure of two tankers in the Strait of Hormuz – the British-flagged Stena Impero and the Liberian-flagged Mesdar. After a weak of selling on forecasts of better growing weather, grains rebounded on technical buying and short covering. 

MACRO OVERVIEW

U.S. consumer sentiment improved modestly in July according to the University of Michigan’s Surveys of Consumers. The headline index rose 0.2 points to 98.4 as the expectations component offset modest declines in current conditions. In the accompanying release, chief economist Richard Curtin observed that “Perhaps the most interesting change in the July survey was in inflation expectations, with the year-ahead rate slightly lower and the longer term rate moving to the top of the narrow range it has traveled in the past few years…The Consumer Expectations Index falls as inflation expectations rise, signifying that consumers view higher inflation as a threat to economic growth. Higher inflation was related more frequently to rising interest rates and was associated with higher unemployment expectations. While the inflation-unemployment relationship is in the opposite direction of the Phillips curve hypothesis, that relationship is usually based on wage inflation, not overall inflation. Consumers’ views appear to be more consistent with the stagflation thesis, which holds that inflation and unemployment move in the same direction. This thesis is more consistent with how consumers process and organize diverse bits of news about the economy.”

    

 

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The information contained herein has been prepared solely for informational purposes and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or to participate in any strategy. Nothing contained herein shall be relied upon as a promise or representation as to the past or future performance.   This material represents the views of RockCreek.  This information should not be construed as investment advice. Some of the information may be provided to discuss general market activity, industry or sector trends, or other broad-based economic, market, or political conditions.  Information and opinions are as of the date of this material only and are subject to change without notice.  RockCreek has no obligation to provide any updates or changes to such information. The opinions, forecasts, assumptions, estimates, and commentary contained in this material are based on information provided to RockCreek on both a formal and informal basis.  Further, any such opinions, forecasts, assumptions, estimates, and commentary are made only as of the date of this material, are subject to change at any time without prior notice and cannot be guaranteed as accurate.

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