Weekly financial market overview 02.08.-08.08.
Main events of the previous week
The International Monetary Fund will provide a record $650 billion from reserve assets. This is the largest disbursement of funds in the history of the IMF. From this amount, $275 billion will go to emerging market and developing countries. The decision will come into force on 23 August. The funds will be transferred to the member countries of the fund in proportion to quotas. According to Georgieva, the allocation of these funds will serve the benefit of all member states, will help meet the long-term global need for reserves, as well as build confidence, strengthen the resilience and stability of the global economy. At the end of July, the IMF clarified its forecasts for the growth of world economies, according to which the global economy will grow by 6% this year and 4.9% next year. The overall estimate for the current year has not changed, but for developing countries, the forecast was lowered by 0.4 percentage points to 6.3%.
The Bank of England last week kept its key rate at a historically low level of 0.1%. In the monetary policy report published on August 5, the regulator raised the inflation forecast, according to which the rate of price growth could reach 4% y/y in the fourth quarter of 2021, after which it will begin to decline. The forecast for a peak of 4% is significantly higher than the regulator's previous estimate of 2.5%, made in May. But the level of 2.5% was reached already in June, which forced the regulator to revise the forecast trajectory of inflation. The volume of purchased corporate and government bonds was also kept at the current level: 20 billion pounds sterling and 875 billion pounds, respectively. However, there are already calls within the Bank of England for a reduction in the quantitative easing program to reduce price pressure. The Bank of England may begin to reduce purchases of government bonds if it comes to the conclusion that inflation is protracted, as well as with the appropriate actions of the Fed.
Eurozone. Following the final revision of the PMI in July, the index rose 0.7 points to 60.2. Of the indicators that make up the index, business activity in the service sector was 1.5 points lower, while the state of the manufacturing sector fell 0.6 points.
US. The unemployment rate in July fell by 0.5 percentage points and amounted to 5.4%, yet the number of new jobs in the non-agricultural sector amounted to 943 thousand, which is 73 thousand more than expected and 5 thousand more than a month earlier.
As a result of the final revision of the PMI in July, the index decreased by 3.8 points to 59.9. Of the indicators that make up the index, business activity in the service sector was lower by 4.7 points, while the state of the manufacturing sector increased by 1.3 points.
The number of initial jobless claims for the week was registered in the amount of 385 thousand, which is 14 thousand less than the week before and 1 thousand more than predicted by analysts.
The trade deficit in June reached a record high of $75.75 billion. Exports grew 0.6% in June, while imports grew by 2.1%.
China. The trade surplus in July was $56.58 billion. Export growth in July amounted to 19.3% compared to July 2020, while import growth amounted to 28.1% over the same period.
According to the assessment of the Caixin Bank, in July the PMI in the manufacturing sector fell by 1 point and amounted to 50.3 points, in turn, according to the National Bureau of Statistics of China, the PMI Manufacturing in July was 50.4 points.
Key events this week
- The inflation rate in China will be announced on Monday.
- On Wednesday, the inflation rate in July, as well as the change in oil reserves for the week will be published in the US.
- On Thursday the Eurozone will report on industrial production for June, and the US will publish the number of initial jobless claims for the week.
- On Friday, the trade balance data for June will be announced in the Eurozone.
The information provided herewith has an informative nature. This information cannot be regarded as an offer or recommendation for purchase, storage or sale of securities, or as an investment recommendation, an investment survey or a consultation on investments, or a recommendation to entrust management of your assets to the specific investment manager. The Client is fully aware and undertakes all risks involved in the investment. This information is prepared by AS Baltic International Bank.