Gerald Fitzgerald’s Market Review July 8th

LAST WEEK IN 30 SECONDS...

Markets pressed ahead strongly over the past week with renewed market confidence on a trade agreement being struck between the US and China. Stronger US employment numbers tempered market optimism on Friday, with investors concerned the positive data may result in the US Federal Reserve holding back interest rate rises. Global equities in euro terms finished the week up 2.7%. Year to date returns for global equities now stand at 20.2%.

With Christine Lagarde’s nomination as successor to Mario Draghi as head of the ECB, investors continue to warm to the idea that she will favour interest rates remaining suppressed. The German 10-year yield finished the week at -0.36%.

THIS WEEK IN 30 SECONDS...

The strong performance in equity markets will be tested this week as the head of the US Federal Reserve, Jerome Powell, is due to speak at multiple events this week. Any hint or indications of interest rates not being cut this month could see significant reverberations within global equity markets.

From a data perspective Eurozone industrial production data is due for release on Friday with updated US inflation metrics due for release on Thursday. The week also sees Q2 corporate earnings results kick off with over 600 company disclosures including Delta Air Lines and PepsiCo.

MARKETS UPWARD ONLY VIEW

With global bond and equity markets rallying, the focus is turning to when the next recession is anticipated. Whilst it was noted a future recession in Ireland is 100% certain, needless to say an American recession would have a significant impact on Ireland. The New York Fed has noted the chances of a US recession within the next 12 months have climbed to 30%. Although the likelihood has risen of late, the party looks set to continue for now with friendly central bank policy.