US and EU strike trade deal; full details still to emerge

Equities were supported by a plethora of trade announcements, including deals between the US and Japan.

In company news, Alphabet beat expectations with its earnings release whilst Tesla remains under pressure from rivals in its key European market. Several of the ‘Magnificent 7’ report earnings this week and will be closely watched by the market.

At its July meeting, the European Central Bank (ECB) Governing Council kept the key deposit rate on hold at 2%. Having cut rates by 200bps in this cycle it was the first time there was no movement in a year. Market reaction was muted. In the post meeting press conference President Lagarde commented the ECB would ‘wait and watch’ in relation to trade tariff negotiations.

The monetary focus this week turns to the Fed who meet in the latest rate decision. Despite pressure from the White House, markets are pricing in no change to the headline rate.  In the US, data last week was mainly focused on housing.

Existing home sales fell 2.7% in June versus May, even as average prices continue to rise. The key 30-year mortgage rate remains steady at approximately 6.75%, kept high by the continued elevated level of US Treasury Yields.

In Europe, July PMI data was positive with the Services figure coming in at 51.0 versus expectations of 50.7 and the Manufacturing figure edged up slightly to 49.8, led by Germany.

In the UK, the composite PMI index fell to 51.0. Whilst still in expansion territory, this figure was below both expectations (51.8) and the previous reading (52.0). Following the release, markets increased the probability of an August rate cut by the Bank of England.

Equities

Global stocks finished up 0.8% in euro terms and up 1.5% in local terms last week. Year-to-date global markets are down by -0.9% in euro terms and up by 12.3% in local terms. The US market, the largest in the world, finished up 0.7% in euro terms and up 1.4% in local terms.

Fixed Income & FX

The US 10-year yield finished at 4.4% last week. The German equivalent finished at 2.7%. The Irish 10-year bond yield finished at 3.0%. The Euro/US Dollar exchange rate finished at 1.17, whilst Euro/GBP finished at 0.87.

Commodities

Oil finished the week at $65 per barrel and is down -19.9% year to-date in euro terms. Gold finished the week at $3,337 per troy ounce and is up 12.1% year-to-date in euro terms. Copper finished the week at $9,716 per tonne and is down -1.0% year-to-date in euro terms.

The week ahead

Wednesday 30^th July

The Fed meets for its latest rate decision.

Thursday 31^st July

Eurozone unemployment and flash Eurozone and US GDP data are released.

Friday 1^st August

US Non-Farm Payrolls goes to print.