With the Pacific G10 Macro Rates Team
Volatility continued declining last week with the VIX reaching lows not seen since the end of February, however it remains historically elevated. US and EM equities finished the week and month on a high, while other equity markets were flat to slightly down. Interest rates continued sliding lower last week, however the noticeable move came from the dollar which was -1% weaker against developed market currencies and -0.35% against the Asian currencies.
US: Strong data on balance. While consumer data was slightly disappointing (Consumer Confidence at 92.6 vs. 95 exp. and 98.3 prev.; Michigan Sentiment at 72.5 vs. 72.9 exp. and 73.2 prev.), manufacturing data was encouraging with the Dallas Fed Index at -3 (-4.8 exp., -6.1 prev.), the Richmond Fed Index 10 (5 exp., 0 prev.) and Chicago PMI at 51.9 (44 exp., 36.6 prev.). 2Q GDP report showed -32.9% annualised contraction of the economy in line with expectations. Continuing jobless claims ticked up slightly, while initial claims continued the downtrend.
Canada: The GDP declined -13.8% YoY in May, slightly better than -14.6% expectations and -17.3% in April.
Eurozone: Strong data came out of Germany. IFO report came in at 90.5 (89.3 exp., 86.3 prev.) driven predominantly by the expectations component. Unemployment surprisingly declined by 18k in July against the expectation for 41k increase. Retail Sales in June were 5.9% higher YoY (3% exp., 3.2% prev.). On the downside, preliminary GDP for 2Q disappointed at -11.7% YoY (-10.7% exp., -1.8% prev.). Preliminary GDP in France came in at -19% YoY (-20% exp., -5.7% prev.), while Consumer Spending increased 1.3% YoY in June (-2.5% exp., -7.2% prev.). 2Q GDP in Italy was -17.3% lower YoY in line with expectations vs. -5.5% in 1Q. GDP in Spain was -22.1% lower in 2Q (-19.7% exp., -4.1% prev.).
Data was strong last week with Retail Sales increasing 13.1% MoM in June, being down only -1.2% on a year. Industrial Production increased 2.7% in June (1% exp., -8.9% prev.).
A quiet week on the data front brought some positive signs for the housing market. Mortgage approvals increased 40k in June (35k exp., 9.3k prev.) and House Prices increased 1.5% YoY in July (-0.3% exp., -0.1% prev.).
Australia: Building Approvals disappointed at -4.9% MoM in June (-2.8% exp., -15.8% prev.), Private Sector credit was 2.9% higher YoY in June (3% exp., 3.2% prev.) and CPI at -0.3% YoY in 2Q (-0.5% exp., 2.2% prev.) with core metrics disappointing slightly.
New Zealand: No significant data.
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