The U.K. Stock market
- The UK stock market was lower this week. The recent rally in global stocks has been fuelled to a large extent by the anticipation that the U.S. Fed will cut interest rates this month, but the better-than-expected U.S. jobs report on Friday seems to have tempered that expectation.
- Most European indices were also lower this week despite the expectation that the European Central Bank will add further stimulus measures. ECB minutes showed that the bank is “ready and prepared” to take action.
- Tensions increased between the U.S. and France after the French senate approved a digital tax on foreign technology companies, mainly from the U.S. President Trump ordered an investigation which could lead to the U.S. imposing tariffs on French goods.
- Our Breadth indicator turned back to neutral and our Momentum indicator ticked up.
The U.S. Stock market
- The U.S. Stock Market was higher this week. Data showed inflation increased slightly in June but despite this, the market still anticipates a rate cut at the end of July.
- This expectation was lifted this week by Fed Chair Jerome Powell’s testimony to Congress in which he was asked whether the recent strong jobs data changed the forecast and he replied “No. Data broadly has continued to disappoint, uncertainty continues to weigh on the outlook, global growth is slowing, and inflation remains muted”. Once again it seems that bad news can be good news for the market.
- Second quarter earnings season is here and investors will be closely following the big banks with many reporting first this coming week.
- Our Breadth indicator stayed positive this week as did our Momentum indicator which also ticked up.
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