The U.S. markets once again became the victim of the commodity sell off disappointing Apple’s earning made matters worse. Traders were not cheerful and decided to shave some more profits off from their current positions. Although, this not to say that overall earnings releases so for for this period was appalling, but yes, surely there have been some weak spots. Especially, when the industry leader announces that there are concerns about the strength of the U.S. dollar, eating up their profits, it surely becomes very convenient for other companies to echo the same excuse. The U.S. dollar is up nearly 20 percent (on a trade weighted basis) as compared to the last year.
However, European markets have shrugged off those concerns and trading higher this morning as investors are jumping back in to clinch bargain deals. Commodity prices remain the major focus among investor as both oil and gold are their constant downward trajectory. The crude oil inventory data released yesterday cements the argument that supply is constantly outstripping demand and the oil glut is becoming even worse. This makes you think that what will happen to inflation, which is the major denominator.
Back in Europe, there is less focus towards Greece- for a change. The prime minister has agreed the bailout terms with its creditors and will do his best to convince his people that the fund of 35 billion euro will revitalise the growth in Greece. There is also a strong possibility that he will call a new election in September to make his position more sturdy in the parliament, as he is still the toughest candidate to occupy the chair again. All labour will be deployed to show that the deal he has agreed, is the best option under the given circumstances.
The economic docket is holding the UK retail sales data as the most significant news event for today. Yesterday, the Bank of England’s decision on interest rate confirmed a unanimous decision. However, this harmony will not last for long as most of the members are itching to hike the interest rate as the UK economy is in a much better position. The evidence of this could be seen as early as next month when we may get to see some members being on the other side of the table and wanting to increase the rate. Most of the members are of the mind frame that inflationary pressure is perfectly balanced and normalising the interest rates will not hurt much.
If the retail number which are due at 09:30 BST confirms that consumers are confident with their spending, it will increase the odds of the split between the MPC members back towards the same number – 7/2 which we had last year.