Weekly Digest - INVESTEC
Please find the latest edition of Weekly Digest attached, which discusses the importance of the US Federal Reserve meeting this week.
Markets closed on a softer note last week, as lacklustre inflation data in the US came together with increased tensions in the Gulf to take 0.2% off US equities, after European and UK equities closed with a 0.3% loss. Friday saw the release of strong US retail sales data, showing a 0.5% month-on-month increase and putting the US Federal Reserve in a difficult position. This week’s meeting will be closely watched as the Fed navigates a tightrope of market expectations (with investors currently expecting two or three interest rate cuts over the next twelve months) and current domestic data trends (which are less supportive of such moves).
Sterling weakened by more than 1% against the dollar over the course of the week, with the current Brexit impasse weighing on sentiment. This week sees the continuation of the Conservative Party leadership election and, by Thursday evening, the candidate list will have been whittled down to two. Thereafter, 160,000 conservative party members will be polled to elect the leader, with results due by July 22nd.
Asian markets were slightly firmer today, looking past Hong Kong tensions, which have the potential to make the upcoming summit at G-20 more complicated. It is still not certain if Donald Trump and President Xi will meet and, if they do, little more than an agreement to resume talks is now expected. Should America follow through in placing tariffs on China after that meeting, and/or publicly backing the Hong Kong people over the authorities, the equity investment winds could turn chilly.
The European Central Bank’s annual three day forum begins today, with Mario Draghi due to speak this evening. Elsewhere in the central bank calendar, policy meetings for both the Bank of England and Bank of Japan are scheduled for Thursday.