Weekly financial market overview 13.07.-20.07.
Main events of the previous week
At their last meeting on July 16, the European Central Bank maintained the level of rates and the volume of asset purchases at the same level. The ECB also said that it is ready, if necessary, to adjust all instruments to ensure a steady growth of inflation toward the 2% benchmark. The deposit rate remained at minus 0.5%, the main refinancing rate, which determines the cost of lending in the economy, is 0.0%, and the emergency lending rate for banks is 0.25%. The regulator left unchanged the volume of the pandemic emergency bond purchase program (PEPP), that was increased to 1.35 trillion euros at the previous meeting. The ECB reiterated that it expects key rates to remain at current or lower levels until it sees a steady move towards the inflation target, that is to a level close enough to but below 2%, which should be sustainably reflected in the inflation dynamics, cleared of volatile and temporary factors.
After three days of the summit in Brussels, the leaders of the EU countries failed to agree on a seven-year budget plan and a plan for economic recovery after the coronavirus pandemic. Summits main topic is the adoption of the budget for 2021-2027 in the amount of € 1.85 trillion, which includes measures to restore the economy. The leaders of the countries of Denmark, Norway and the Netherlands insist on tight control over the spending of aid. On the other side are countries like Italy and Spain, which have been hit hardest by the pandemic and are seeking as much support as possible. The summit of the leaders of the EU countries began in Brussels on Friday, July 17 and was supposed to end on Saturday, July 18. Today, July 20, will be the fourth day of the summit.
US. The consumer price index in June increased by 0.6% versus May, while the annual inflation was also at 0.6%. The growth of the core inflation rate, excluding food and energy, was 1.2% y/y in June.
The volume of retail trade in June increased by 7.5% versus May, while the growth rate of retail trade in annual terms was 1.1%. In turn, excluding data on gasoline and car sales from the indicator, retail sales in June rose by 7.3% compared to May.
The number of initial jobless claims for the week were registered in the amount of 1.3 million, which is 10 thousand less than week before and 50 thousand more than analysts predicted.
Eurozone. The consumer price index in June rose by 0.3% versus May, while the annual inflation was also at 0.3%. The growth of the core inflation rate, excluding food and energy resources, amounted to 0.8% y/y in June.
The volume of industrial production in May increased by 12.4% versus April, while in annual terms the decline in production volumes in May amounted to 20.9%.
China. According to published data, China's GDP grew 3.2% year-on-year in the second quarter (compared to the second quarter of 2019), while analysts projected the GDP growth of 2.5% y/y in the second quarter.
Retail sales in June fell 1.8% versus June 2019, while retail sales were expected to grow by 0.3%. In turn, the volume of industrial production in June rose by 4.8% over the same period.
The unemployment rate, as predicted in June, continued to decline and amounted to 5.7%, which is 0.2 percentage points lower than a month earlier.
Key events this week
- The U.S. Senate will begin the debate this week on a fifth coronavirus-response bill. Democrats will push for $3 trillion in aid, while Republicans will insist on smaller $1 trillion aid. Another important issue will be the extension of cash payments to citizens, which on current terms is supposed to end by the end of July.
- On Wednesday, the US will publish data on what is happening in the real estate market, as well as changes in oil reserves for the week.
- On Thursday, the US will publish the number of initial jobless claims for the week.
- On Friday, the level of business activity (PMI) in July will become known in the Eurozone and the United States.
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