Weekly Market Update (09/07/2023 - 15/07/2023)
U.S. personal consumption figures indicate weakness despite personal economic indicators tell a different story, U.S. regular inflation rates come down significantly and the USD depreciates significantly on the week versus major trading pair currencies.
U.S. Consumption
• For the first time in nearly 3 years, the Redbook index reported negative YoY change – coming in at -0.40% - highlighting a slowdown in consumption and spending from the U.S. consumer. The fall in this figure goes hand in hand with the depreciation in the USD.
• Notwithstanding, the consumer discretionary sector in the U.S. posted the second highest positive weekly gain compared to other sectors despite the release of the figure and is the 3rd best performing equity sector in the U.S. equity market YTD.
• Despite a seemingly dim outlook for consumption as posted by the redbook figure, wage and salary growth, a tight labour market and a recovering personal savings rate seems to support a healthy outlook for the U.S. consumer.
Equities
• Lower than expected CPI prints in the U.S. pushed domestic and global equity markets upwards in anticipation for what could be the easing of the FED’s policy decision making.
• From a momentum standpoint, the SP500’s 50-day simple moving average remains well above the 100 and 200-day moving average, providing continued buying support.
Currencies
• U.S. dollar depreciated versus main trading pairs (EUR, JPY, GBP, AUD) on the week. The ‘Ozzy’ dollar appreciated against the USD more significantly by 2.41%.
• Months-long trend of a depreciating dollar versus EUR and GBP since October of last year continues to be significant – YTD the GBP is positive versus the dollar.
Commodities
• Similar to last week’s move, oil prices moved higher by approx. 3.30% after the release of the Baker Hughes oil rig count in North America shows a consistent decreases in the number of active North American oil rigs.
• Gold price remains close to $2000 per ounce and is 7% up YTD mainly due to the spike that occurred in early March after the bankruptcy and collapse of Credit Suisse and Silicon Valley Bank.
• On a weekly basis, natural gas prices headed lowerby 6% while gold was up 1.5%.
Interest Rates
• The most recent regular CPI print reporting a YoY change of 2.97% moves the needle closer towards the FED’s inflation target, thus alleviating pressure for the FED to continue increasing interest rates at the same pace as it did in the past. The CME FED FedWatch tool currently predicting a 25-basis uptick in the next FOMC with 99.8% probability.
• Negative rate spreads between 10-year treasury rate and 3-month rate increased as buying pressure for longer-term treasuries pushed the 10-yr rate down.
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Disclosure: This is not investment advice. Blue Portal Insight does not provide investment advice but rather provides commentary on market movements and insight into industry information. For investment advice, please refer to your financial advisor or an equally licensed professional.
