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Global equity markets ended mostly weaker last week, amid renewed trade war fears between the US and China. UK markets ended the week in red, after the Bank of England (BoE) signalled a gradual and limited hike in future interest rates and the BoE Governor, Mark Carney, expressed concerns over no-deal Brexit. On the macroeconomic front, UK’s Markit manufacturing PMI fell more-than-expected in July, hitting its lowest level in three months. Additionally, the services PMI dropped more than market expectations to a three-month low level in July. Further, the GfK consumer confidence index unexpectedly declined in July. In contrast, the nation’s construction PMI surprisingly climbed in July, recording its highest level since May 2017. Moreover, the Nationwide house price index advanced more than market forecast on a monthly basis in July. Further, mortgage approvals rose more than market anticipations to a five-month high level in June. European markets ended the week on a negative footing, after the Eurozone’s gross domestic product grew at a slower-than-expected pace in the second quarter of 2018, recording its weakest expansion in two years. Meanwhile, the region’s consumer price index (CPI) advanced more than market forecast on an annual basis in July, notching its highest level since late 2012. The final manufacturing PMI advanced in July. Retail sales rose less than market forecast in June. Further, unemployment rate remained unchanged at the lowest level since December 2008 in June. Also, the final consumer confidence index remained unchanged in July. Separately, Germany’s annual CPI rose less than market forecast in July. Additionally, the Markit manufacturing PMI advanced less than market expectations in the same month. US markets ended the week in positive territory, on the back of upbeat corporate earnings results. On the data front, the US consumer confidence index surprised with a rise in July. Average hourly earnings rose in line with market expectations in July. Additionally, unemployment rate dropped to an 18-year low rate in July. Moreover, private sector employment jumped more-than-anticipated in July. Factory orders climbed at par with market forecast in June. Also, durable goods orders advanced in the same month. Further, initial jobless claims advanced less than market expectations in the week ended 28 July 2018. On the flip side, the nation’s manufacturing PMI recorded an unexpected drop in July. Additionally, the MBA mortgage applications declined in the week ended 27 July 2018. Further, trade deficit widened for the first time in four months in June. Moreover, change in non-farm payrolls climbed less-than-anticipated in July. Furthermore, the Markit services PMI eased more than market forecast in July. Asian markets ended in the negative territory last week.

 
     

Currency Update

 


The EUR ended lower against the USD, after the Eurozone’s GDP grew at a slower-than-expected pace in in two years in 2Q18. The British Pound ended weaker against the greenback, after the BoE Governor, Mark Carney, signalled that Britain is on course to leave the European Union without a deal. The US Dollar ended stronger against its major counterparts last week, after the US Federal Reserve (Fed) acknowledged solid economic growth and signalled a rate hike in September.

 
 

 

Fed leaves benchmark interest rate unchanged, upgrades assessment of the US economy

 


The Federal Reserve (Fed), at its August monetary policy meeting, decided to maintain the target range for the federal funds rate at 1.75% to 2.00%, as widely expected. The Fed stated that economy is growing at a “strong rate” and labour market is strengthening, with inflation near its 2.0% target. The central bank also reiterated that “further gradual increases” in interest rates would be consistent.

 
 

 

The Week Ahead

 


Going ahead this week, investors will keep a tab the European Central Bank’s economic Bulletin and the Sentix investor confidence index along with Germany’s trade balance and industrial production for further direction. Additionally, the US CPI, producer price index, Jolts job openings, consumer credit, MBA mortgage applications and monthly budget statement along with UK’s GDP, trade balance, Halifax house price index, RICS house price balance, industrial and manufacturing production will attract significant amount of investor attention.

 
 

 
 

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