US stocks ended higher On Tuesday for fourth consecutive day despite unexpectedly low retail sales data. The dollar weakened as US Treasury yields fell, with the ICE US Dollar Index falling 0.2% to 96.67. S&P 500 advanced 0.5%. We believe the stock market action reflects “the worse the better” valuation mindset as weak economic reports make it more likely that the Fed will delay the interest rate hike. Retail sales in June fell 0.3%, while the prior two months’ figures were also cut with May retail sales growth revised lower to a 1% increase from a previous estimate of 1.2% gain. The disappointing sales data suggest the US economy growth slowed. The report on import prices also came in weaker-than-expected. Today at 15:00 CET Fed Chair Janet Yellen testifies to House Financial Panel and market participants will be watching closely to gauge how the disappointing reports impacted Fed’s view on US economy performance and plans for interest rate hike. Today at 12:00 CET Mortgage Applications will be released in US. At 13:30 CET June producer price index will be released. The tentative outlook is negative. At 14:15 CET June industrial production will come out. The tentative outlook is positive. At 19:00 CET the Beige book will be released, and at 20:00 CET FOMC voting member Williams will speak on economic outlook in Phoenix.
European stocks edged higher as investors awaited the Greek lawmakers’ approval of the bailout agreement on Wednesday. Euro remained flat against US dollar. The recovery in energy shares, which fell earlier in the day on news a nuclear deal had been reached between six world powers and Iran, helped push stock market up. The Stoxx Europe ended up 0.5%, Germany’s DAX 30 gained 0.3% and France;s CAC 40 rose 0.7%. The Greek stock market and banks remained closed. The Greek Finance Ministry said it had submitted the legislation required by the bailout deal to parliament for a vote today. International Monetary Fund published a Debt Sustainability Analysis, which said European countries would have to give Greece a 30-year grace period on servicing all its European debt, including new loans, and a dramatic maturity extension. It should be noted that Greece insisted on debt write downs and restructuring, but no final decision was made. No important economic data are expected today in euro-zone. At 9:30 CET job market data will be released in UK. The tentative outlook is positive.
Nikkei rose 0.4% today as Bank of Japan left monetary policy unchanged. Tomorrow at 06:00 CET Bank of Japan monthly report will be published in Japan.
Chinese stocks fell today despite official GDP report indicating China's economy grew 7.0% in second quarter from a year earlier, slightly above expected 6.9% growth. Industrial output and retail sales in June also beat expectations.
Today at 15:00 CET Bank of Canada rate decision and monetary policy report will be released in Canada. The central bank is expected to cut the interest rate 0.25% to 0.5%.
Oil prices are falling today after closing higher on Tuesday as investors estimate that it will take time for Iran to ramp up oil output considerably to increase exports after US, five world powers and Iran agreed on nuclear deal yesterday. Today at 15:30 CET Crude Oil Inventories will be released by Energy Information Administration.
Gold prices fell yesterday for fourth straight session.