U.S. and World News
Just three weeks after the U.K. voted in favor of leaving the European Union, Theresa May took over from David Cameron to become the 54th British Prime Minister. Financial markets appeared to approve of the selection although many analysts have said the implications for the U.K. economy could be much bigger due to uncertainty about her policies. May has wasted no time readying her Brexit team as she has appointed a Chancellor, foreign secretary, a Brexit “Tsar” and a trade negotiator.
- Staying in the U.K., the Bank of England surprised the market by choosing to hold off on any easing action this week. It was believed that BOE Governor Mark Carney would cut rates 25 basis points or increase its bond buying program in the wake of the Brexit vote in order to ward off a possible recession.
- This week the S&P 500 was up 1.51% for the week and closed at 2,162. The Dow Jones gained 2.04% and closed at 18,517. So far in 2016, the S&P is up 6.94% and the Dow is up 7.68%.
- The 5 year and 10 year U.S. Treasury Notes are now yielding 1.11% and 1.56%, respectively.
- The spot price of WTI Crude Oil gained 1.17% this week to close at $45.94 per barrel. WTI Crude is up 9.69% in 2016.
- The spot price of Gold lost 2.21% this week, closing at $1,336.15 per ounce. Year to date, gold prices are up 25.92%.
- Initial jobless claims came in at 254,000 which was unchanged from last week’s reading. The Labor Department noted no special factors in the data. The four week moving average for claims moved down to 259,000.
- The headline Consumer Price Index (measure of inflation) rose 0.2% in June, below estimates of 0.3%. This was boosted by a 1.3% increase in energy prices, although food prices decline -0.1%. Over the last 12 months, headline CPI has risen 1.0%.
- The Core CPI (excludes food and energy) rose 0.2%, in line with expectations. Rent inflation remained firm, rising 0.3% in the month. Over the last year, core prices have risen 2.3%.
- Retail sales increased by 0.6% in June, soundly beating estimates of 0.1%. Sales were boosted in part by higher gasoline sales as fuel prices rose.
Fact of the Week
- As of 6/30/2016, there was $11.7 trillion of sovereign debt that carries a negative interest rate (ie. investors loaned governments money with the guarantee that they would be paid back less if they held the bond to maturity). This represents over 30% of the world’s sovereign debt. Countries issuing negative yield debt include Japan, Germany, Sweden, Denmark and Switzerland. (Source: Fitch Ratings)
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*Image of Theresa May, Photo credit:UK Home Office, via Wikimedia Commons. License: Creative Commons Attribution 2.0 Generic license.. (See, https://commons.wikimedia.org/wiki/File:Theresa_May_2015_(cropped).jpg).
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