Market's evolution 04 of July to 08 of July 2016

Market's evolution 04 of July to 08 of July 2016


Last week was closed with the publication of a surprising result in the update of non-farm jobs creation in June, the figure rose to 287.000 new positions from the 175.000 that were expected.

In this way, concerns about the uncertainty became (slightly) lighten at a global level. In fact, in the recent statements made by Janet Yellen (president of the FED) and at the minutes published on Wednesday by the agency, rate increases were discarded for the year. Concerns about the weakness of growth levels and the effects that the Brexit might have on the US economy were shown as well.

In Europe, we kept opened the exit of UK from the EU as the main concern. Moreover, we have been able to see the first consequences; an immediate drop in business confidence levels and the suspension of repayments of some English real estate funds after the avalanche of requests for the same output. In the same way, the Bank Of England spoke about the current situation of uncertainty, ensuring that measures would be taken to stabilize the levels of growth and labor market developments.

Secondly, we have followed closely the evolution of Italian banks due to new doubts about the sustainability of the sector after the high amount of debt defaults. In response, the Italian government could intervene by injecting 150.000 million euros (as long as the European Union authorized).

About Asia, we must highlight the rise in the Caixin PMI leading indicator of China which maintained expansive levels (now 52,7 compared to the previous figure of 51,2). On the other hand, Japanese PMI services fell to 49,4 (which means that contractive levels were reached). And, contrary to what was expected, Kuroda (prime minister) did not spoke about changes in monetary policy in their recent statements.

Usually, the pressure on government bond markets continued increasing due to the flight to quality. The latent market uncertainty drove bond prices to increase, decreasing IRRs to minimum levels.

As for the equity markets, we highlight the publication of a drop in corporate profits expectations of -4% for the S&P500. However, the weekly close was positive on Wall Street before the good jobs data published; Technological Nasdaq Composite rallied near a +2% (now around the 4.528), while the S&P500 recorded advances of +1,28% (closing at 2.129 levels). In Europe, the closures were in negative territory with -1,50% in the DAX and EUROSTOXX50 (reaching 9.629 and 2.838 respectively).

As for currencies, the euro recovered ground against the yen and the dollar, while sterling rose by +2,74% closing at 0,8528 EUR/GBP.

Regarding commodities, gold continued making progress and ended the week at 1.366 USD/Oz., However, crude suffered heavy cuts (-7,13%) after the update of crude oil inventories which became to be higher than expected.