A look at the day ahead in U.S. and global markets from Mike DolanChina’s spluttering recovery set the tone for world markets on Monday after a bumper week of U.S. disinflation news was capped with impressive bank results and rising consumer confidence.In what was read as another underwhelming collection of macro updates, China said its annual economic growth rate picked up to 6.3% in second quarter, well below the 7.3% forecasts as base-effects offset a firmer 0.8% expansion during the quarter.Sub-forecast and sharply slowing retail sales growth for June likewise offset a more upbeat industrial output readout for the months.Even though the closure of Hong Kong and Tokyo markets on Monday dampened trading volumes in Asia, Shanghai stocks (.SSEC) slipped almost 1% and the yuan fell back too.Crude oil prices also retreated sharply below $80 per barrel, underlining year-on-year declines of more than 20% through mid-July that help sustain headline disinflation pressures into the second half of the year.And it’s that disinflation story, and hopes the Federal Reserve will deliver a final hike of its 16-month rate rise campaign next week, that drove Wall St stocks to their best levels in more than a year last week, with the tech-heavy Nasdaq (.IXIC) clocking up its biggest weekly gain since March.Two-year U.S. inflation expectations embedded in the Treasury market fell as low as 1.88% on Friday and held at 1.90% on Monday, well below the Fed’s 2% target.Surveys showing surging U.S. household confidence in June, as real wage growth turns positive and jobs remain plentiful, saw a hesitation in interest rate markets on Friday as Fed officials enter a blackout period before the July 26 decision.Even though falling import and export prices in June reinforced the disinflation picture, two-year Treasury yields recouped some of the week’s steep declines. That, in turn, stalled stock indices slightly in red at the close on Friday.Big banks made an impressive start to the Q2 earnings season with profit beats for the likes of JPMorgan, Citi and Wells Fargo - but red flags raised about credit and real estate and the impact of tighter regulation saw their shares slip on the day.Other major banks such as Bank of America and Morgan Stanley report on Tuesday, with Tesla and Netflix on Wednesday the first of the mega cap tech giants to weigh in.LUXURY FIRMSU.S. stock futures were little changed ahead of Monday’s open, but two-year Treasury yields edged back lower to 4.72%.The dollar (.DXY) edged lower again, with the euro briefly hitting its highest since February last year.”Peak Fed” speculation has pummeled the dollar again this month, with hopes that mirrored gains in the euro and sterling will help blunt hotter inflation pictures there. British June inflation readings on Wednesday will be critical for UK markets.The euro trade-weighted index hit its highest level on record on Friday, surpassing a prior peak from late 2008. Sterling’s equivalent last week hit its…
Original from www.reuters.com
