U.S. Finance, Economy, Energy Letter
For week beginning July 11
What happened last week?
The most important development last week was non-farm payrolls beating market expectations. After very weak numbers in May, the U.S. economy added 287,000 jobs in June, marking the highest monthly jump since October last year, according to the Labor Department on Friday. Analysts expected 180,000 new jobs to be added.
After the very strong data of non-farm payrolls, the U.S. stock market closed with gains on the final day of trading. During trading hours on Friday, the S&P 500 reached 2,131 at one point -- an all-time high for the index. Meanwhile, the Dow Jones closed above the critical threshold of 18,000 for the first time in two weeks.
Last week, the Dow Jones rose 1.1 percent; the S&P 500 was up 1.3 percent while the Nasdaq recorded a gain of 1.9 percent. However, oil prices lost around 7 percent last week.
The repercussions of the U.K. leaving the EU, also known as the Brexit, continued to make headlines last week as the International Monetary Fund (IMF) and global rating agencies Moody’s and Fitch Ratings made statements. The IMF said Friday that it expects the euro zone to grow by 1.6 percent this year, but by 1.4 percent next year.
Moody’s also announced Friday that it lowered the U.K.’s growth forecast and the euro area for 2016 and 2017 due to the Brexit. The ratings agency said it cut expectations for the U.K. to 1.5 percent for 2016, from 1.8 percent; and to 1.2 percent for 2017, from 2.1 percent. Additionally, the agency cut growth expectations of the euro area slightly, to 1.5 percent for 2016, from 1.7 percent; and to 1.3 percent for 2017, from 1.6 percent.
Fitch Ratings also warned against Brexit negotiations, saying, “They will be protracted and contentious. They are likely to be subject to setbacks and outright reversals, potentially side-tracked and possibly stalled for periods.”
What to expect from this week?
It will be a busy week with many macroeconomic data in the U.S., as investors and the markets will particularly focus on inflation data.
On Wednesday, export and import price indexes for the month of June will be announced. In May, the indexes came in at 1.1 percent and 1.4 percent, while expectations for June are 0.3 percent and 0.5 percent respectively.
Producer price index (PPI) will be announced on Thursday, and consumer price index (CPI) will be revealed on Friday. After rising 0.4 percent in May, PPI is expected to increase by 0.3 percent in June. CPI rose 0.2 percent in May, while the market expectation for June is a rise of 0.3 percent.
On Wednesday, the Federal Reserve’s Beige Book will be revealed to provide detailed information about the well being of the U.S. economy.
On Friday, retail sales for the month of June will be announced. Retail sales rose by 0.5 percent in May, but the market now expects it to increase only by 0.1 percent in June.