Market Recap: Week of June 15th 2015

Market Recap

Global equity markets ended the week relatively flat as the Greek crisis dominated the headlines, against a backdrop of mixed economic data. US economic data showed positive signs that the economy is regaining momentum after a disappointing start to the year. Meanwhile, the World Bank downgraded their forecast for global GDP growth in 2015 to 2.8%. The economic weakness in China continued as imports fell more than expected in May, down 17.6% from a year earlier. 

Still, despite this and the decision by index provider MSCI to delay the addition of mainland Chinese shares to the MSCI Emerging markets index, the Shanghai Composite index bucked the trend last week gaining 2.85%, while the major indices in the US and Europe languished. The German 10-year government bond yield moved above 1% for the first time since September, but later dropped back to 0.84% as risk assets sold off. While core government bond yields ended the week lower, peripheral bond yields moved higher, with the Irish 10-year yield closing up 8bps at 1.69%.

Week Ahead

European equity markets closed significantly lower Monday following the news of a breakdown in Greek debt deal talks. Greek shares sold off sharply and the Greek 2-year government bond yield hit 29.02%. The German DAX equity index fell 1.89%, now down 11% since the April peak.

Key macro data for the week ahead includes reports on retail sales, inflation and employment from around the globe.  In Europe there are reports on the balance of trade, inflation and the latest ZEW Economic survey from Germany. The European Central Bank will release their latest economic bulletin, providing an update on the latest macroeconomic projections and monetary policy developments.

The monthly Eurogroup meeting will take place on Thursday, where the finance ministers of the Euro member states aim “to promote conditions for stronger economic growth”. However, it is not entirely clear how productive these meetings are. Top of their agenda for some months now has been the Greek situation, but little progress has been made. That same day, Greek Prime Minister Alexis Tsipras will no doubt be sipping the best of vodka with Russian Prime Minister Vladimir Putin in Moscow, as he plays on European fears over a Greek tilt towards the ‘the Russian bear’.

There is a host of data released from the UK including inflation, retail sales and the labour market, as well as the minutes from the Bank of England’s most recent monetary policy meeting. The Bank of Japan will hold their monetary policy meeting on Friday with no change expected, while the US Federal Reserve’s announcement on Wednesday will be keenly watched. No change in interest rates is expected but all eyes will be on Janet Yellen’s press conference as investors look for clues on whether economic data has picked up enough to warrant a rate hike in September.