Risk appetites return to the capital markets as investors believed that the global growth story was not as bad as previously perceived. The S&P 500 Index rallied significantly as many data points began to point to better than expected growth. The Australian employment picture, the US jobless claims and the Canadian employment report all pointed to solid employment growth.Canada added 90 thousand jobs, a record for a month, which was 4 times an analyst expectation. The S&P 500 index increase by 6 points to close at 1077.
The pound has held up extremely well given the economic data that was released during the past week. The UK reported simply dreadful May trade figures. A deficit of GBP8.1 billion compares with expectations of a GBP7 billion shortfall following April’s revised GBP7.4 billion deficit (was initially –GBP7.3 billion). Exports rose a minor 0.2% while imports rose 2.4%. The roughly 30% drop in sterling on a trade-weighted basis since 2007 has not translated into better trade figures, but it has been arguably a factor behind the higher UK inflation. The UK reported today that producer prices unexpectedly fell in June for the first time in over a year. The 0.3% fall contrasts with expectations for a 0.0/+0.1% consensus forecast. Oil products, scrap metal and food prices account for the weakness in input prices. Raw material prices as a whole fell 0.2% for the second consecutive month. It gives some hope that consumer prices may be near a crest themselves. The UK reports June CPI figures on July 13. The consensus is for the year-over-year pace to ease to 3.2% from 3.4%. Cable has spent the week in a broad sideways market, arguably nesting before taking another leg up. Key support is seen in the $1.5080 area, but it probably will require a break of $1.50 to really undo the constructive tone.
Wholesale inventories rose 0.5% to a seasonally adjusted $398.81 billion, following a downwardly revised 0.2% increase in April, the Commerce Department said Friday. Originally, April inventories were estimated to have grown 0.4%. Sales decreased 0.3% to $350.65 billion, compared with a 0.9% jump a month earlier. Inventories have been on the rise in recent months as wholesalers and other businesses rebuilt stocks drawn down during the recession. Wholesalers account for about 30% of all business inventories in the U.S., with manufacturers and retailers making up the rest.