Fundamental Analysis
EUR
“The swath of disappointing data [have] confirmed how difficult it is to turn China’s economy around…”
- Rebecca O’Keefe, head EUR of investment at Interactive Investor
Inflation in Europe's largest economy remained unchanged at 1.7 per cent in July, compared to the prior month, national statistics office Destatis data showed on Friday. The cost of living increased by 0.4 per cent on a monthly basis, pushed by higher holidays and petrol costs.
European stocks dropped on Friday after a report showed China’s trade surplus shrunk by more than forecast.
The Stoxx Europe 600 Index erased 0.14 per cent to 269.88. Germany’s DAX Index slid 0.29 per cent and France’s CAC 40 Index declined 0.61 per cent.
“The swath of disappointing data [have] confirmed how difficult it is to turn China’s economy around and while we can expect stimulus measures to be introduced, questions remain as to how effective they will be in the short term,” said Rebecca O’Keefe, head of investment at Interactive Investor.
USD
“At the core level, declines in [import] prices are unlikely to be significantly felt at the consumer level”
- Peter Newland, an economist with Barclays Capital
Import prices in the world’s largest economy unexpectedly fell for a fourth straight month in July, pushed down by lower fuel and consumer goods prices. Overall import prices retreated 0.6 per cent, after declining 2.4 per cent in June, said the Labor Department on Friday.
Even with import prices sagging, “people are still going to wonder whether the Fed will embark into another round of quantitative easing,” said Robbert Van Batenburg, head of global research at Louis Capital Markets.
“At the core level, declines in prices are unlikely to be significantly felt at the consumer level,” said Peter Newland, an economist with Barclays Capital in New York.
The Standard & Poor's 500 gained 0.22% to 1,405.87. The Dow Jones Industrial Average advanced 0.32%, or 42.76 points, to 13,207.95. The Nasdaq Composite advanced 0.07% to 3,020.86.
GBP
“If the rest of the world were growing normally, the rebalancing and recovery of our [U.K.] economy would be much easier”
- Mervyn King, Bank of England Governor
Bank of England Governor Mervyn King said the sovereign debt crisis in Europe is far from being resolved, few days after the Bank of England cut its growth forecasts and told the national economic outlook is “unusually uncertain.”
“If the rest of the world were growing normally, the rebalancing and recovery of our economy would be much easier,” King wrote in an article in the Mail on Sunday newspaper.
“But it isn’t. Even the rapidly expanding emerging-market economies are slowing, and the problems of the euro area continue with no obvious end in sight.”
U.K. stocks closed in red on Friday. The FTSE 100 Index lost 0.08 per cent, or 4.40 points to 5,847.11. The broader FTSE All-Share Index erased 0.05 per cent.
CHF
“Fairly disappointing trade and new loans data out of China have renewed worries that China’s slowdown might be more pronounced than originally feared”
- Markus Huber, head of German sales trading at ETX Capital
Swiss stocks lost ground on Friday after a report showed that China trade surplus narrowed to less than expected $25.1 billion in July, a sign the global economy is slowing.
The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies lost 0.34%, or 21.85, to 6,483.44. The broader Swiss Performance Index erased 0.36%, or 21.66 points, to 5,994.37.
“Fairly disappointing trade and new loans data out of China have renewed worries that China’s slowdown might be more pronounced than originally feared,” Markus Huber, head of German sales trading at ETX Capital in London, wrote.
“So far this week’s market action -- a consolidation at high levels -- doesn’t come as much of a surprise, especially after the impressive run up of the previous couple of weeks.”
JPY
There “remains a high degree of uncertainty about the global economy”
- Bank of Japan
Japan’s economy expanded by 0.3 per cent from the previous quarter or at annualised rate of 1.4 per cent in the second quarter, said the Japan’s Cabinet Office on Monday. Annualised growth fell well short of economists’ forecasts of 2.3 per cent growth rate.
“Japan’s economic activity has started picking up moderately as domestic demand remains firm mainly supported by reconstruction-related demand,” said the bank of Japan in a report last week.
There “remains a high degree of uncertainty about the global economy,” it added.
There “remains a high degree of uncertainty about the global economy,” it added.
“The GDP was much lower than expected, fueling negative sentiment. That’s also driving expectations the Bank of Japan may add monetary easing, which is bolstering markets.”
