Market Commentary
Will negative economic data signal easing ahead?: All eyes are on Bernanke's testimony on Tuesday and Wednesday, against a background of lacklustre growth at home and a lingering debt crisis in Europe that is increasingly preoccupying U.S. policymakers. U.S. retail sales fell in June for the third straight month, the longest run of consecutive drops since 2008 when the country was mired in recession, adding to evidence that the economy is slowing.
The S&P 500 has fallen in seven of the past eight sessions, pressured by concerns about economic growth. Still, in a sign of resilience, the index is up roughly 7 percent from a low hit early in June despite the worsening economic data. Citigroup's earnings, which exceeded estimates, followed JPMorgan Chase's forecast-beating earnings on Friday, which sparked a rally and broke a six-day streak of losses by the Dow industrials. Many companies have warned on profits in recent weeks. Negative to positive earnings guidance for the second quarter is 3.3 to 1, the worst since 2008, Thomson Reuters data showed.
The International Monetary Fund on Monday cut its forecast for global economic growth and warned that the outlook could dim further if policymakers in the euro zone do not act with enough force and speed to quell their region's debt crisis.
Gold traders watch Bernanke: Gold traded almost flat on monday, retaining gains from the previous session’s 1.5 percent rise after investors consider prospect of more stimulus coming from China after growth slowed to one of the worse quarters in recent years. China's Premier Wen Jiabao said efforts to stabilise the economy are working and the government will step up efforts in the second half of the year to increase policy effectiveness and foresight.
U.S. consumer sentiment cooled again in early July to its lowest level in seven months, while producer prices rose only slightly last month, the latest data showed. U.S. Federal Reserve Chairman Ben Bernanke will present his semi-annual monetary policy report to Congress on Tuesday and Wednesday, from which investors will seek clues on the Fed's attitude towards another round of quantitative easing. For the day ahead, we expect trading volume to be thin ahead of Bernanke’s testimony.
