The UK’s high streets are heaving with shoppers notwithstanding June's shock vote to abandon the European Union. Moreover, big businesses have already reported few signs of distress, while some tabloid newspapers are discussing a post-Brexit economic boom.
The overwhelming view from financial experts is that it’s too early to know how the United Kingdom will cope with years of Brexit uncertainty, though there’s a soaring belief that the country can avert a recession, which just weeks ago was regarded as probable.
On the face of it, the early upbeat mood contrasts with the pre-referendum warning from ex-Prime Minister David Cameron that Brexit would put a bomb under the British economy.
In August, retail sales reversed much of an immediate post-Brexit vote dip, with retailers posting their strongest sales for six months as industry data revealed on Thursday, mostly due to a weaker sterling attracting overseas buyers.
Japan July consumer prices show the biggest annual fall for three years
In July, Japan's core consumer prices edged down for a fifth straight month and demonstrated the most enormous annual sag for more than three years, as more companies had to hold back price lifts due to poor consumption, thus keeping the major bank under pressure in order to expand an already massive stimulus program.
The gloomy data backs a dominant market view that Japanese premier Shinzo Abe's stimulus programs have turned unable to dislodge the deflationary mindset prevailing among consumers and businesses.
In July, the nationwide core consumer price index, excluding volatile fresh food prices, but including oil products, sagged 0.5% from a year earlier, as government data revealed on Friday. In fact, it exceeded a median market forecast for a 0.4% drop and it turned a bit bigger than a 0.4% tumble in June.
While dropping energy costs were mostly behind the dip in consumer prices, ascends in imported food prices as well as hotel room rates moderated in a clue that poor consumption is discouraging firms from passing on soaring costs.
On Monday, crude-oil prices kicked off August in rather a choppy trade because ongoing glut in refined and crude oil keeps exerting pressure on crude prices.
In New York, September delivery light and sweet crude futures traded at $41.75 a barrel, showing a $0.14 rise. Meanwhile, the October contract of Brent crude gained up to $0.18, being worth $43.71 per barrel after the initial dip at the start of the trading session.
The market appears to be more volatile also erratic ahead of the expiry of a contract because market participants are on the verge of rebalancing their books by simply covering their long or short trading positions.
However, supply and demand trends in the crude market are still lopsided, while prices are most likely to move sideway in the nearer future especially considering the absence of strong push or pull factors.
Over the weekend, American crude prices clawed back some ground after the major American currency got sold heavily.
Asian shares hit one-year high
Asian stocks managed to hit a one-year peak, following gloom American economic growth data, which ruined hopes that the Fed would lift interest rates in the nearer months.
American GDP surged at a 1.2% annual rate during the April-June period, which is less than a half of a 2.6% growth rate economists had expected.
Market participants have been shifting their money to Asia, that’s likely to be least influsenced by Brexit, while the Fed appears to be in no hurry to increase its interest rates.
MSCI's broadest index of Asia-Pacific stocks outside Japan soared 1.3%, getting to the highest level for about a year.
European shares are supposed to head north, with spread betters looking at surge of 0.7% in Germany's DAX as well as 0.4% in the UK’s FTSE.
Asian markets demonstrated quite limited reaction to a better-than-expected private poll on China's factory sector.
Meanwhile, the Caixin/Markit Manufacturing Purchasing Managers' index or PMI ascended to a 1 1/2-year peak of 50.6, thus beating market expectations for 48.7.
EconomyVN - After months of negotiations, US Media Verizon Group officially acquired Yahoo.
Verizon acquired Yahoo for $4.8 billion
After months of negotiations, US Media Verizon Group officially acquired Yahoo, which is a famous multinational technology company including chat services, email, and portal Yahoo search, via a takeover deal costs $4.8 billion. This merger marks the end of a 21-year history of the existence of Yahoo. This process is expected to be completed early next year.
The global M&A value can reduce $1,600 billion if Brexit negotiation delays.
According to the latest report of the law firm Baker & McKenzie, the value of the business mergers and acquisitions (M&A) on a global scale can be reduced to $1.600 billion in the next 5 years, if UK does not soon negotiate the conditions to leave the EU (Brexit). But experts said that the consequences of Brexit will focus on the UK and Europe, will not entail a new financial crisis.
US: Second quarter economic growth lower than forecast
The US Commerce Department said its second quarter GDP was only 1.2%, lower than the experts' forecast of 2.6%. The main reason was that the US enterprise stopped new investments in production. Expenditure on the construction or purchase of equipment of enterprises continued to decline. Many predict that, if the US economy is still sluggish, the Fed will be difficult to raise interest rates this year
Number of flight booking to France fell by more than 15% after the Nice terrorist
The number of travelers booking flights to France in two months fell by 16% after the horrific terrorist attack in Nice on 14th of July. This is the latest survey result issued by ForwardKeys travel company. Particularly, in Nice - the top tourist city, the number of tourists are expected to drop to 20% over the same period last year.
On Friday, Australian stocks edged up after the close today, as revenues in gold, healthcare as well as consumer discretionary sectors brought stocks higher.
At the close in Australia, the S&P/ASX 200 earned 0.07%, hitting a fresh 6-months peak.
The best performers of the trading session on the S&P/ASX 200 include Resmed Inc with its 7.55% rise, trading at 9.260. Meanwhile, Bega Cheese Ltd gained 6.90%, being worth 6.200, while Austal Ltd soared 5.94%, trading at 1.160.
As for the worst performers of the trading session, we should mention Beach Energy Ltd, that sank 5.13%, trading at 0.555, Aconex Ltd with its 4.94% dip, trading at 7.985 as well as Fortescue Metals Group Ltd, which sagged 4.11%, being worth 4.430.
Rising shares outnumbered decreasing ones on the Australia Stock Exchange by 586 to 501, while 315 ended intact.
Stocks in Resmed Inc edged up to 52-week peaks, soaring 7.55% at 9.260.
The S&P/ASX 200 VIX, gauging the implied volatility of S&P/ASX 200 options, slumped 0.39%, hitting 14.179 a fresh 3-months minimum.
FTSE 100 slumps, but Barclays earns on Brexit reassurance
British shares flipped in and out of losses, with traders sifting through corporate earning posts as they obtained word of a tumble in British consumer confidence.
The FTSE 100 earned 0.2%, being worth 6,733.16, thus setting the blue-chip index on track for a 3.5% monthly revenue, marking a second straight monthly soar.
For the week, the benchmark braced for a 0.1% soar, which would extend its weekly winning streak into a sixth week.
As for movers, stocks of Barclays PLC managed to top the FTSE 100 by soaring 4.2%. Meanwhile, the banking heavyweight reassured market participants regarding its course of business in the wake of Great Britain’s Brexit referendum, including an initiative to close non-core assets as soon as possible.
Financial analysts are assured that it’s the right plan for Barclays, and they don’t see any reasons to adjust this stuff in light of the vote by Great Britain the previous month to leave the EU.
USD rose to the highest level in four months in last trading session of the week as the positive economic data increased expectations that US Federal Reserve (FED) will raise interest rates until the end of the year. In trading sessions of 20th July, the US dollar index measuring the strength of the greenback versus a basket of currencies was closed at 97.50 raising to 0.5%, the highest since March 2016.
According to the Association of American national real estate, home sales in the country last month rose 1.1% in June, the fourth consecutive rising month, the highest level since February 2007. On the job market, Labor Department said the number of applications for unemployment benefits on 16th of July firstly fell 1,000, to 253,000, a 13-week low. Data released earlier also showed that retail sales, consumer prices and industrial production in the US in June rose further. Meanwhile, reports of non-agricultural jobs in June announced earlier this month, also stressed the labor market is recovering strongly and allay concerns about the deceleration of economic growth.
The recently released positive data on US economy increases expectations of investors that Fed will raise interest rates before the end of this year. The percentage predicting the Fed will raise interest rates by 0.25% from the end of the year has risen to 46% from 12% in earlier this month.
Periodic policy meeting of Fed will take place on 26th and 27th of July, and in anticipation of observers, the agency will keep interest rates at this meeting and wait for the evaluation of the impact of the UK leaving the EU for US economic outlook before adjusting interest rate policy. In spite of not giving policy direction for the coming period, any positive assessment of Fed for the US economy bring considerable support for USD.
British Pound fell sharply in the last session of the week because British economy shows worrying signs of the first month since UK chose to leave the EU. Markit survey published on Friday showed that both PMI manufacturing and services in July of UK will fall below 50, this indicates contraction. In July PMI fell to 47.7 from 52.4 in the previous month. Thus the index has fallen to the lowest level since early 2009. July's PMI warns UK economic growth will decline significantly in the third quarter. Most analysts predict that the Bank of England (BoE) will cut interest rates at its meeting next August and the issue is whether the cut will be 0.25% or 0.5%.
On Friday, the British pound edged lower, after the release of gloomy economic posts from Great Britain contributed to worries over the outlook for the UK’s growth following the country’s intention to break up with the European Union.
The currency pair GBP/USD achieved 1.3173 during European morning trade, the session minimum and the pair managed to consolidate at 1.3175, losing 0.42%.
Cable was about to gain support at 1.3061, which is the minimum of July 20 as well as resistance at 1.3313, the peak of July 18.
Research group Markit informed in July its flash British manufacturing purchasing managers’ index edged down to 49.1 from June’s outcome of 52.1. Financial experts had expected the index to sink to 47.8 this month.
At the same time, in July the British services PMI sagged to 47.4 from June’s result of 52.3, compared to expectations for a 48.9 drop.
The data contributed to fears over a slowdown in Great Britain’s growth as traders keep assessing the economic effects of the Brexit vote.
British Pound rose again in the trading session of the early week after policy maker at Bank of England (BOE) Martin Weale said that they need to wait for the assessment of the economic impact before deciding whether to rate cut or not. After BOE took no action last week, any doubts of the members of BOE on the need to easing monetary policy given push Pound higher.
However, many analysts believe that sterling is in brief recovery period and the clearance-sale of the currency will soon return. A series of important statistics of the British economy published this week include the inflation data, employment, retail sales and PMI index is forecast to show the weakness of the British economy and convince BOE on the necessity of easing interest rate policy. Britain's weak data published this week could be the beginning of a sharp decline of Pound.
Turkey has arrested thousands of soldiers after the coup failed yesterday 15th of July and the government claimed to have control of the whole situation. This move has helped to allay fears of new instability after the economic and political issues in Europe, this prompted investors to return to riskier currencies and escape Japanese yen as safe haven assets, so it pushed USD/JPY back to threshold 106 after falling last week.
Aside from the economic data of UK, the market's attention this week was focused on the PMI of Eurozone and the results of the meeting of European Central Bank (ECB). Analysts predict ECB will not make any policy changes in this session. However, ECB President Mario Draghi might open to a stimulus in the near future if Eurozone economic prospects deteriorate due to the influence of Brexit. Any signals of easing policy given will create downward pressure on Euro.
GBP/USD: SELL: 1.3280; TARGET: 1.3130; STOP-LOSS: 1.3360
USD was noted soaring against other major currencies during last week trading session following the positive data of U.S. economy, it strengthens reviews of the world's biggest economy of steady growth in the second quarter. In July 15th session end, Dollar Index measuring the strength of greenback versus a basket of currencies rose 0.7 percent to 96.60 points.
Report of the US Department of Commerce published Friday said U.S. retail sales in June rose 0.6%, 2016, significantly higher than 0.1% anticipated by analysts and recorded the third consecutive increase. Other statistic showed that U.S. industrial output rose 0.6% in June, recorded the strongest increase in 11 months. Besides, the consumer price index (CPI) in June rose 0.2%, same as the increase in May, this showed inflation tends to go up.
The positive statistics of U.S. economy boost investor back to the expectation that Fed will increase interest rates in the remaining months of this year. However, analysts believe that Fed will continue expressing caution at the meeting on June 26-27th. The Agency will await the evaluation of the impact of UK leaving the European Union (EU) for the prospects of the U.S. economy before giving the signal to adjust policy interest rates.
The coup in Turkey on Friday evening July 15th has created momentum for gold prices to go up in last week session. However, demand for haven assets diminished after the coup ended in defeat to push gold prices falling back in the first session of this week. Analysts suppose that the gold price this week will likely continue under pressure by the upward uptrend of USD.
Notable economic information this week is the PMI index of the euro area and the results of the meeting of the European Central Bank (ECB). Analysts predicted the ECB would not make any policy changes would in this session. However, ECB Chairman Mario Draghi will open the possibility for economic stimulus in the coming period if the Eurozone economic prospects deteriorate due to the influence of Brexit.
Though British pound fell during the session Friday but it had a recovery from the 31-year low after the Bank of England (BoE) kept interest rates at 0.5%, against forecasts of interest rate cuts. Employment data and retail sales of June announced this week as prediction will put pressure to GBP to drop again.
GOLD: SELL 1338; TARGET: 1322; STOP-LOSS: 1346
European banks amount to spend to maintain operations in the UK will rise sharply when UK left out of the European Union (EU), also known as Brexit, according to a study by Boston Consulting Group (BCG) was quoted by the Financial Times posted.
Specifically, according to BCG, European banks will have to spend more to 30-40 billion euros in the UK subsidiary to maintain operation after Brexit. So it means operating costs of European banks in the UK each year will increase from 8% to 22%.
The costs increase too high so more likely will lead to no less the Bank would cease some operations in Britain. Certainly, the foreign banks will encounter a lot of difficulties during the late Brexit by previous regulations, just they have a license to operate in one of the 28 member countries, they will have the freedom to operate in all the other Member States.
Hitherto, the focus of the attention of public opinion still is Bank of America, because they often consider London as a gateway to Europe. However, BCG's research report focuses on about 60 European Bank currently having one or more branches in the UK, included some of the most prominent names such as Deutsche Bank, Commerzbank, BNP Paribas, Santander, Societe Generale or some small banks like Erste, Novo Banco or Piraeus.
"Everybody says much about the Bank of America but in fact, European banks will impact more severely. In fact, Europe is not too important to the American Bank because it brings from 20 to 30% of their profits. But with European banks, UK is very important because with some banks sometimes 70% of their business activities currently housed in Britain", one of the senior researchers at BCG, Mr. Philippe Morel said.
Late Brexit, the first thing that European banks will need to do is apply for the license to operate in the UK, they had not thought of this for decades. In addition, they will also have to be bound to increase capital at the request of the governing body of the British banking industry, just like what happened in the United States.
Activities of the European Bank in Britain will be divided into operations in the UK and in Europe. As the calculations of BCG, the only German banks have to add about 10 billion euros and at least will have to increase capital by 10 billion euros. For the EU-wide banking industry, they will need to add at least 30 to 40 billion euros.