Major developed market equity indices started the week strongly but lost momentum and ended only slightly higher. The Russell 2000 index of small capitalization shares edged the S&P500 and Dow indices higher. The announced acquisition of data analytics firm Tableau by Salesforce.com for over USD 15 billion boosted the technology sector but the energy sector was affected by a larger than expected increase in US crude oil inventories followed by news of tanker attacks in the Gulf of Oman thereby increasing price volatility (chart above). The attacks lowered US treasury yields which were already dipping on account of soft inflation data, trade tensions and a general risk off sentiment.
The European Union reached an agreement to buy 80% of their beef imports from the US for 7 years after successfully persuading Australia and Argentina to relinquish part of their quota. It is hoped that the settlement of this decade long dispute will avert any further trade tariffs escalation between the economic blocs and relieve pressure off the German car industry. In the UK however, car production declined the most on record in April and further deterioration is predicted by the Society of Motor Manufacturers and Traders. Former Foreign Secretary B. Johnson is on course to become the next Prime Minister after finishing well ahead of his rivals in the first round of voting by the Conservative party.
The Shanghai Composite index finished nearly 2% higher on fresh stimulus hopes after closing at a four month low the week before. Industrial production in May rose by only 5%, its weakest pace since 2002 and fixed assets investments was also below expectations. Retail sales for May were however surprisingly strong at 8.6% y/y compared to expectations of 8.1%. The G20 meeting in a fortnight will shed light on whether trade tensions will subside and global monetary policy responses will be better coordinated.
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17 June 2019
Global Economic Growth Slows
Soft Economic Data Keeps Treasury Yields Low
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