Discussing movements in stock markets after the terrible events in France, Turkey and late on Sunday in America, seems remarkably insignificant. These tragedies around the world shock every right thinking individual, but maybe slightly surprisingly seem to have had little effects on the capital markets at present. Aside from these terrible acts the fallout from Brexit continues to make headlines. Somehow you get the feeling that the analysts view that the vote was one to invite economic doom, seems to be losing a little of their bite.
Sterling continued its recovery during the week, rising at one point to almost $1.35, however it did lose some ground by the end of the week, closing on Friday just below $1.32. The Ftse 100 climbed another 1 pct on the week consolidating gains made last week, the FTSE 250 continues to recover from the lows, gaining just over 3 pct on the week. The Telegraph reported that the chief economic adviser to the ITEM club, believes that the UK economy will avoid a recession. Australia have become the latest nation to suggest discussing trade links with the UK post Brexit. Helena Morrissey, Chief Investment Officer at Newton Investment Management, interviewed in the Times believes the concerns over passporting rights which allow UK based financial companies to sell their products across Europe have been exaggerated. Only time will tell what the real effects are if we do eventually deliver Brexit.
Hardly a day goes by in the week ahead without a data point that will be commented on in relation to Brexit. On Tuesday, inflation is forecast to come in at 0.5% year on year for June. On Wednesday we get the latest employment data and average earnings, Thursday retail sales and on Friday the Markit Purchasing Managers Surveys flash estimates for July. Any weakness in these numbers are almost bound to be put at the doorstep of the Brexit vote. Forecasts are for a fall in Service, Manufacturing and the Composite index to below the critical 50 level which would suggest an economic contraction.
Looking across the pond another decent set of economic data in the form of retail sales and industrial production, along with a solid start to the earnings season will make July’s interest rate setting meeting on the 27th an interesting one. The Federal Reserve may decide that with summer and an upcoming Presidential election to leave well alone, however there is a risk that the market has not anticipated a surprise move by the members of the Federal Reserve.
A slightly less eventful meeting is likely to be the ECB meeting this Thursday, as the ECB are unlikely to add further stimulus measures. What may be of interest is any comments Mario Draghi may have on Brexit and its impact on the wider European economy, the likelihood is he will pay a straight bat to any questions.