Angelo Taningco
Economist, Treasury Group
US equity markets were again mixed at the start of the week as the Dow slid 0.1% whereas S&P 500 and NASDAQ were up 0.2% and 0.3%, respectively. Data released Monday highlighted a rebound in economic growth as the Chicago Fed National Activity Index turned positive at 0.43 in June from −0.45 in May. In contrast, existing home sales unexpectedly plunged 0.6% mom in Jun (market forecast: +0.2%) following a 0.7% contraction in May. Meanwhile, Alphabet Inc., the parent company of Google, reported better-than-expected Q2 earnings.
Company earnings are still expected to influence the equity market this week. Among the firms seen to announce their latest earnings include tech companies (Amazon, AMD, AT&T, Facebook, Intel, Qualcomm, Twitter), financials (Deutsche Bank, Nomura, UBS, Visa), and other corporates (Boeing, Lockheed, Nissan, Shell). Moreover, US Q2 GDP data will be released on Friday, with the market expecting 4.2% growth, which indicates a sharp acceleration from the Q1 rate of 2.0%. Such strong growth rebound will bode well for US equities.
Meanwhile, there still exists concerns over US trade tensions with China and EU. US president Donald Trump has recently labeled the two economies as “currency manipulators”, adding that they are taking advantage of the US. He also said that he is willing to go all out in imposing tariffs on $500 billion worth of Chinese imports. Trump also criticized the Federal Reserve, saying he’s “not thrilled” with the Fed’s rate increases; this followed Fed Chair Jerome Powell’s congressional testimony, which highlighted the Fed’s plan to continue with its gradual rate hikes. US Treasury Secretary Steven Mnuchin tried to assuage investors fears, saying that the Trump administration is not undermining the Fed’s independence and that there’s no chance of a currency war.
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