The Weekly Wrap – Economic Data and COVID-19 News Drives the Markets
Bob Mason
8 min read
The Stats
It was a particularly busy week on the economic calendar, in the week ending 17th July.
A total of just 74 stats were monitored, following the 30 stats from the week prior.
Of the 74 stats, 44 came in ahead forecasts, with 18 economic indicators coming up short of forecast. 12 stats were in line with forecasts in the week.
Looking at the numbers, 45 of the stats reflected an upward trend from previous figures. Of the remaining 29, 21 stats reflected a deterioration from previous.
For the Greenback, it was a 4th consecutive week in the red. In the week ending 17th July, the Dollar Spot Index fell by 0.73% to 95.942. In the week prior, the Dollar had fallen by 0.53%.
For the U.S, the daily COVID-19 numbers continued to spike to fresh highs in the week. Earlier in the week, news of progress towards a successful treatment drug delivered riskier assets with support, however.
Looking at the latest coronavirus numbers
At the time of writing, the total number of coronavirus cases stood at 14,189,223 for Friday, rising from last Friday’s 12,604,895 total cases. Week-on-week (Saturday thru Friday), the total number of cases was up by 1,584,328 on a global basis. This was higher than the previous week’s increase of 1,429,821 in new cases.
In the U.S, the total rose by 484,462 to 3,770,012. In the week prior, the total number of new cases had risen by 399,290.
Across Germany, Italy, and Spain combined, the total number of new cases increased by 10,432 to bring total infections to 743,647. In the previous week, the total number of new cases had risen by 7,406. Spain reported 2 consecutive days of more than 1,000 new cases.
Out of the U.S
It was a relatively quiet week on the economic data front.
Key stats included June industrial production and retail sales figures. July’s manufacturing sector and consumer sentiment figures were also in focus along with the weekly jobless claims.
Both industrial production and retail sales were on the rise once more in June supporting riskier assets.
The NY Empire State Manufacturing Index also got a much-needed boost in July.
By contrast, initial jobless claims rose by another 1.3m, with the Philly FED Manufacturing Index falling from 27.5 to 24.1.
At the end of the week, a deterioration in consumer sentiment in July was also negative.
In the equity markets, the NASDAQ fell by 1.08%, while the Dow and S&P500 gained 2.29% and 1.25% respectively.
Out of the UK
It was also a particularly busy week on the economic calendar.
Early in the week, manufacturing production and GDP figures for May delivered mixed results.
Manufacturing production rose by 8.4%, following a 24.4% slump in April, with the UK economy expanding by 1.8% in May. The UK’s 3-month rolling average GDP fell by 19.1%, however, following a 10.4% fall to April.
In the 2nd half of the week, claimant counts fell by 28.1k in June. This was a marginal decline, however, following a 566.4k jump in April. The unemployment rate held steady at 3.9% in May.
While the stats were mixed, it was a pullback at the start of the week that did the damage. Negative sentiment towards Brexit had weighed on the Pound going into the week.
In the week, the Pound fell by 0.43% to $1.2568 in the week, partially reversing a 1.11% gain in the previous week. The FTSE100 ended the week up by 3.20%, reversing a 1.10% loss from the previous week.
Out of the Eurozone
It was a relatively busy week economic data front.
Key stats included ZEW Economic Sentiment figures for Germany and the Eurozone.
Trade and industrial production figures from the Eurozone were also in focus.
The stats had a relatively muted impact on the EUR, however. Economic sentiment in Germany fell back in July while seeing a marginal pickup across the Eurozone.
Industrial production and trade figures also reflected an improving economic environment across the Eurozone.
The main event of the week, however, was the ECB’s monetary policy decision. In line with expectations, the ECB held policy unchanged, while assuring the markets of continued support.
Away from the numbers, news of progress towards a COVID-19 vaccine was also positive. A continued spike in new COVID-19 cases across the U.S did pressure the Greenback.
At the end of the week, the gathering of EU member states to discuss the EU Recovery Fund was also in focus. Hopes of progress had provided the EUR with support on Friday.
For the week, the EUR rallied by 1.13% to $1.1428, following a 0.46% gain from the previous week.
For the European major indexes, it was a bullish week. The DAX40 rose by 2.26% to lead the way. The CAC30 and EuroStoxx600 weren’t far behind with gains of 1.99% and 1.60% respectively.
For the Loonie
It was a relatively busy week on the economic calendar.
Economic data included manufacturing sales and wholesales sales figures for May.
While both reflected a partial recovery from April’s slump, it was the BoC monetary policy decision that was the main event.
On Wednesday, the BoC stated that there would be no rate hikes until the BoC achieved its inflation objective. The BoC also reiterated its willingness to deliver more support if the need arises.
As expected, the BoC did talk of uncertainty over the economic outlook.
In the BoC’s central scenario, the Bank forecasts real GDP to decline by 7.8% in 2020 before 5.1% growth in 2021.
The Loonie rose by 0.09% to end the week at C$1.3580 against the Greenback. In the week prior, the Loonie had fallen by 0.33% to C$1.3592.
Elsewhere
It was a mixed week for the Aussie Dollar and the Kiwi Dollar.
In the week ending 17th July, the Aussie Dollar rose by 0.66% to $0.6996, while the Kiwi Dollar fell by 0.26% to $0.6557.
For the Aussie Dollar
It was a relatively busy week for the Aussie Dollar.
Early in the week, business and consumer confidence figures delivered mixed results. While business confidence pickup in June, consumer confidence rose at a softer pace in July.
For the RBA, both business and consumer confidence are key to support the economic recovery.
In the 2nd half of the week, employment figures were in focus. The stats were mixed, pinning the Aussie Dollar back.
While employment rose by 210.8k, full employment fell by 38.1k, with the unemployment rate rising from 7.1% to 7.4%.
It wasn’t enough to sink the Aussie, however, which had visited $0.70 levels in the week.
News of progress towards a COVID-19 vaccine contributed to the upside.
For the Kiwi Dollar
It was a relatively quiet week on the economic data front.
Key stats were limited to 2nd quarter inflation figures and June’s Business PMI.
In the 2nd quarter, inflationary pressures eased, with the annual rate of inflation falling from 2.5% to 1.5%. Consumer prices fell by 0.50% over the quarter, partially reversing a 0.80% rise from the 1st quarter.
A rebound in manufacturing sector activity was positive on Friday, however. The Business PMI jumped from 39.7 to 56.3, supporting a 0.34% gain for the Kiwi on the day.
Positive GDP numbers from China had failed to give the Kiwi a boost mid-week, however.
For the Japanese Yen
It was a particularly quiet week on the data front.
Finalized industrial production figures for May were in focus that failed to move the dial.
The Japanese Yen fell by 0.08% to end the week at ¥107.02 against the Greenback. In the week prior, the Yen had risen by 0.54%.
Out of China
It was a busy week on the economic data front.
The stats were skewed to the positive, though ultimately, the numbers were not to the market’s liking.
In the 2nd quarter, the economy grew by 11.5%, quarter-on-quarter, reversing a 9.8% contraction from the 1st quarter. Year-on-year, the economy grew by 3.2%, partially reversing a 6.8% contraction from the 1st quarter.
Fixed asset investment and retail sales disappointed, however, with declines of 3.1% and 1.8% respectively.
In the early part of the week, June trade figures had a relatively muted impact on risk sentiment.
In the week ending 17th July, the Chinese Yuan rose by 0.10% to CNY6.9924 against the Dollar. In the week prior, the Yuan had gained 0.95%.
The CSI300 slid by 4.39% in the week, with the Hang Seng falling 2.48%, with U.S – China tensions weighing.
