Market Recap: Week of June 22nd

Market Recap

Global equity markets struggled to gain momentum last week as Greece continued to dominate the headlines, with the Greek banking system now on emergency life support from the ECB. The major US equity indices bucked the trend, as US Fed Chairwoman Janet Yellen reminded investors that while the first rate hike may be imminent, the pace of rate hikes will be gradual. The standout last week was China’s Shanghai Composite Index, which fell 13.32%! Yields on government bonds were broadly lower over the week.

Outlook: Week Ahead

European equity markets have opened higher on the hope that a debt deal on Greece will be struck at the emergency summit of European leaders today. The bottom feeders have moved back into the Greek equity market with bank shares posting double digit gains. However, while we are seeing a relief rally in equity markets, an agreement is still yet to be reached. As well, unless there is a credible sustainable debt deal, and not just giving money with one hand of the troika to pay another, this crisis will continue to fester.

On the macro front this week the focus will be on the flash purchasing manager index (PMI) data for June, with a particular eye on Europe, Japan, China and the US. Unlike the official data, the PMI data is more valuable for assessing the trajectory of the global economy. The final estimate of first quarter US GDP growth is released on Wednesday. However, reports from the US on durable goods, employment, housing, spending and consumer confidence will provide a more useful gauge of whether the weakness in the first quarter was just transitory or something more serious.

The minutes from the Bank of Japan’s (BOJ) monetary policy meeting held last week will be released on Wednesday, providing further insight into the BOJ’s outlook for the economy and their quantitative easing program. It is a foregone conclusion that BOJ Governor Haruhiko Kuroda is prepared to add further stimulus if inflation fails to pick up as expected.