Market's evolution 11 of July to 15 of July 2016

Market's evolution 11 of July to 15 of July 2016


Throughout the week we have witnessed many significant events. We have just started the reporting results season in the US and updated the Fed Beige Book and the meeting of the BOE (among others that try to explain in the following lines).

On the one hand, in Europe, the banking sector breathed relieved after that the Superior Court judgment that financial institutions would not have to repay the amount of floor clauses retroactively. As for Italian banks, we are still waiting to know the evolution of the government's negotiations with the other members from the EU. However, a group of members reassured the markets by subtracting gravity to matter.

From the UK, we have attended to the investment of Theresa May as Prime Minister which, together with the maintenance of the interest rates after the meeting of the BOE, led to rallies in the pound. Similarly, the statements made by the new prime minister ruled out the possibility of remaining within the EU and to undertake new attempts to referendum. Similarly, the possibility of emergency budgets were as well discarded. In contrast, recent data published is not that hopeful (consumer confidence levels are at minimum levels since 2014 at 49,4), so it might force the BOE to move tab during the month of August.

As for the forecasts displayed by the Fed, moderate growth levels were determined, although the labor market continued to strengthen. Nonetheless, new increases were recorded in price levels, and Harker from the Fed surprised the market announcing that two rate hikes might take place during the year.

Positive developments were made in Asia after the surprising update of GDP data from China, reflecting that the country is still able to maintain growth levels (the latest figure stood at +6,7%). They improved confidence indicators also in Japan after refusing the possibility of considering the famous "helicopter money" and the absolute majority obtained by Prime Minister Abe in elections to the Senate. On the downside however, further reductions in growth forecasts for Japan (now those stood at + 0,9% from + 1,7% data previously predicted).

In this context of apparent "stabilization" appetite for riskier assets it seemed to come on the scene again, which led to upturns in the IRRs of government bonds and new developments in the main selectives. The greatest advances are found in Europe; above + 4% in the IBEX 35, DAX and the EUROSTOXX50. Advances in the US were more moderate but, surprisingly, increases in the S&P500 reached new historical maximums and closed at 2.161 levels rising a +1,50%. In Asia we highlight the rise of +9% in the NIKKEI225.

As for currency, the Euro lost ground against the Dollar and the Pound (now at levels of 1,1034 EUR/USD  and around 0,8366 the EUR/GBP). On the other hand, the EUR/JPY recorded new progress closing at 115,60 levels after the rebound of +4%.

As for commodities, crude oil prices remained below the levels of 50 USD/Brent unchanged. By contrast, the ounce of gold fell by -2% after the strong gains recorded during the last weeks.