While the European Union surrounding the United Kingdom seems to continue struggling, the United Kingdom is beginning to see numbers improve at the completion of this year’s second quarter, according to information released by the International Monetary Fund. Considered to be one of the fastest-growing economies, its repeated growth for the last several quarters proves it is finally reaching pre-recession standards.
Less Americans are applying for mortgages and retail sales growth is decelerating amidst sluggish demand from consumers.
The Commerce Department reported retail sales excluding cars rose 0.1% in July, down from 0.2% in June. In a separate report, the Labor Department saw inflation-adjusted average weekly earnings fall by 0.2% in the 12 months to June 2014, the biggest decline since October 2012.
Despite efforts to improve the state of the economy worldwide, including the European Union, geopolitical issues have dictated otherwise, causing various countries’ stocks to slip and create an increased amount of worry. While most analysts believed the European Union was starting to see a comeback, the lowering numbers have shocked them, and they believe the geopolitical issues have a direct effect.
Today will likely prove to be the most eventful of the week. It has already featured Q2 Japanese GDP, a slew of Chinese data, euro zone industrial output and UK employment and the BOE’s quarterly inflation report. Still to come are US retail sales and Fed talk.
Starting a few years ago, several countries within the European Union (EU) were placed under direct scrutiny to determine causes of debt and attempt to reconcile the issue through various bonds being sent. While Greece and Spain were the hardest hit initially, other countries are beginning to feel the effect, specifically Italy and Germany.
Houses selling for less than $200,000 are becoming harder to find in U.S. markets as home prices continue to rise at a strong but slowing pace in 2014.
July 2014 marked the seventieth anniversary of the Bretton Woods conference, which laid the foundation for the post-WWII international financial system. The conference established the IMF to stabilize the world economy and the World Bank to finance post-war reconstruction. Both have evolved into pillars of present-day global finance.
With many major idiosyncratic EM risk events now behind us, the general tone will be almost entirely set by the mood in developed markets and ongoing geopolitical events. Still, we think the recent sell-off in global financial markets may have created some opportunities to establish EM trades at better level. Long MXN and INR, for example, seem to offer good short-term opportunities. On the other hand, the risk-reward for the likes of ZAR and TRY are still not yet attractive enough, in our view.
Due to Prime Minister Shinzo Abe’s growth strategy, known as Abenomics, Japan’s stockmarket is up by three-fifths since he came into office. However, despite the progress made by Abe and his allies, Japan’s economy likely shrank for the first time in nearly two years during the second quarter. The reason for the economic decline appears to be due to the weaker than expected consumer spending. Although the recent sales tax hike definitely helped weaken consumer spending, it appears that a decline in the wages of Japanese workers is putting a real drag on the economy.
China’s growth outlook is the focus of analysts and economic policymakers all around the world. Nobody can afford now to ignore the scale of the economy and its impact on the global growth outlook. China already accounts for more than 12 per cent of world output in nominal terms and that share continues to grow steadily.
