Thungen Financial 30th July 2014 - Global Market Update
Global markets look set for a good end to the 2nd quarter as Asian Markets reach near 6 and a half year highs, European markets look set to improve and in the US they continued to see record closes.
In Japan, negative news on industrial output was pushed aside as good earnings helped the Nikkei push back close to its top. Despite seeing Industrial Output drop 3.3% in June, its steepest drop since November 2011 when the earthquake and tsunami hit. The Bank of Japan has been implementing very small steps in an effort to combat its ailing economy and rising social costs. Its most recent effort to increase sales tax in April saw a knock on effect which, even though expected, was harsher than expected. Excess inventories are now a concern as retail sales and domestic demand lower due to consumers having brought their major purchases before the sales tax increase. With the aging population placing a huge pressure on the Japanese finances and exports taking their time to return to normal levels, some analysts believe that the BoJ may need another strategy.
European markets continue to air on the side of caution as the EU looks to announce its latest round of sanctions on Moscow. Although several Eurozone members have had a good economic performance so far this year, the UK, Spain and Germany (to some extent), many have been seeing poorer than expected growth and several eastern EU members have the crisis in the Ukraine as a serious cloud over their imminent future. With the major banks of Russia being targeted and EU citizens not being able to purchase some Russian bonds or trade on the MICEX, should the situation continue to run on, many will be concerned whether Moscow, with Mr. Putin at the helm will threaten to turn off the gas as Europe approaches winter. Although this scenario is very unlikely, the fact that it is a possibility is a huge hurdle for the EU and urging Moscow to pursue political, not military resolutions in the region will help calm many local governments.
It's all good news in the United States however. The Fed is due to makes its 2nd Quarter GDP Report later today and forecasts show growth of above 3% as opposed to the 1st quarters 2.9% loss. If data is as forecast, that puts the first half of the year flat and see's 2014's GDP expansion predicted to be in the region of 2%. There is a range of data due today before the Fed report and the majority is expected to be positive. Employment is nearing full capacity and domestic demand is up on the first quarter, a key indicator that people are starting to do better. The Fed will probably mention its reduction in asset buying and that wages need to increase quicker. Whether there will be any hints towards a rate increase sooner than the predicted mid 2015 is very doubtful. A more cautious Fed statement is expected as the local markets continue to stay near their record highs.
It is very possible that we may see the S&P500 break 2,000 for the first time in its history as the end of the 2nd quarter earnings season draws to an end and corporations continue to report bumper profits.
Major Global Markets as of 30th July 2014
FTSE 6,807.75 +0.29% Dax 9,653.63 +0.58%
Dow 16,912.11 -0.42%
Nikkei 15,646.23 +0.18% Hang Seng 24,853.67 +0.87%
MICEX 1,361.94 -1.91%
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DISCLAIMER The views, opinions, findings, and conclusions or recommendations expressed on this service are those of the author(s) and do not necessarily reflect the views of the Thungen Financial Advisors. All market data within this release is for your general information and enjoys indicative status only. Thungen Financial Advisors does not accept any responsibility for its accuracy or for any use to which it may be put. All share prices and market indexes delayed at least 15 minutes. 52 week high and low values are calculated from close price data.