Market movers today
It is a quiet day on the data release front. A speech by Fed’s William (voter, neutral) ahead of the crucial Fed meeting at the end of July will be in focus. The market is looking for hints on how forceful the Fed’s rate cut will be (25 or 50bp cut). There are set to be more speeches by Fed board members later this week.
In the UK, the leadership contest in the conservative party is heating up ahead of the vote on who should become the next leader of the country. Focus is on the extent to which Boris Johnson can force through a no-Brexit deal by suspending the Parliament.
Later this week, US confidence indicators such as the Philly Fed index will provide fresh signs about the strength of the US companies in July.
Selected market news
Asian equities are mixed this morning as China’s economic releases showed that the Chinese economy slowed to the weakest pace since the early 1990s amid the ongoing trade standoff with the US. Real GDP growth slowed to 6.2% y/y in the second quarter. Meanwhile, industrial production in June expanded by 6.3%, stronger than expected by financial market analysts and faster than in May, indicating that a stabilisation is emerging amid the impact of loosening monetary conditions, evident from Friday’s monetary numbers. In addition, fixed assets investments were stronger than expected in June.
On Friday, US President Trump criticised China for not purchasing enough US agricultural products as agreed at the G20 meeting in Japan earlier this month. The comment underscores the challenges in finding an agreement between the two sides amid considerable distrust between the two sides. Furthermore, Trump is probably encouraged by the buoyant US stock market, where the S&P 500 broke through the 3000 level for the first time last week.
The Turkish lira is under pressure this morning following Fitch’s decision to cut Turkey’s sovereign further to Junk over the weekend. Fitch reduced the nation’s long-term foreign currency debt rating to BB-, three notches below investment grade and on par with Brazil, Greece and Bangladesh. The ratings company warned of deteriorating institutional independence and economic policy credibility after President Recep Tayyip Erdogan unexpectedly removed Cetinkaya as his central bank chief last week. On top of the concerns of institutional independence in the country, there is a looming risk of tightening US sanctions, as the delivery of parts of a Russian missile system is taking place, which has been sharply criticized by the US. We expect the Turkish Lira to weaken in the coming months against the USD.