Market movers ahead
- In the US, the coming week will be relatively quiet on the data front, although durable goods orders could give us an important indication of whether investment activity has turned the corner, broadening the overall economic recovery.
- In Europe, the focus is still on Greece and the coming week’s EU summit could bring news about the readiness of EU leaders to help Greece out. It will also be interesting to see if forward-looking indicators continue to signal an accelerating recovery.
Global Update
- Risk sentiment is still improving in spite of Greece’s debt problems. Equity markets are pricing in an increasingly significant economic recovery – the downside is a greater risk of disappointments.
- The FOMC signalled that US rate hikes are still some way off. This was confirmed by US inflation numbers, with core inflation on the soft side. Nonetheless, we expect market rates to move upwards going forward.
Focus
- We expect China to resume the gradual appreciation of its currency within a few months to contain inflation.
- The market reaction could be negative for equities in the short-term, as a stronger CNY will put a dampener on Chinese GDP growth. On the other hand, CNY appreciation will stimulate growth outside China. A stronger CNY could reduce China’s currency reserves, which would be slightly negative for US bonds.
