Market Digest – Week Ending 8/15
US Stocks extended last week’s gains, as investors grew more comfortable with events in Iraq, Ukraine and Gaza. The Eurozone failed to grow in Q2, prompting concerns about the fragile recovery and sending bond yields lower globally. Late Friday, reports that the Ukrainian military destroyed a significant portion of a Russian armed convoy which was crossing the border also created demand for Treasuries.
S&P 500: 1,955 (+1.2%)
FTSE All-World ex-US: (+1.4%)
US 10 Year Treasury Yield: 2.34% (-0.08%)
Gold: $1,305 (-0.4%)
USD/EUR: $1.340 (-0.1%)
- Monday – Factset reported US companies are on track for 8.4% earnings growth in Q2, well above most expectations.
- Tuesday – King Digital, the makers of Candy Crush Saga, reported lower than expected earnings. Shares fell 22% in after-hours trading.
- Tuesday – Retail sales were little changed in July, marking the worst results in six months.
- Wednesday – Ukraine refused entry to a convoy of Russian trucks which Russia says are intended to provide humanitarian assistance to rebel-held areas.
- Wednesday – S&P declared Argentina in default after it missed a bond payment.
- Wednesday – Amazon began offering a mobile payments system intended to undercut providers like Square and PayPal.
- Thursday – The Eurozone economy stalled in the second quarter, posting flat growth. The German economy shrank for the first time in more than a year.
- Friday – Ukraine said it destroyed part of a Russian column of armed vehicles which crossed the border.
- Friday – Supervalu confirmed it is investigating a possible widespread data breach and credit card information theft.
A stall in Europe’s economic recovery is bad news. Unlike the US, Europe has never gained solid momentum in the wake of the sub-prime crisis. The US has moved on from sub-prime, but Europe can’t say it has officially overcome its own government debt issues. Bond yields remain low, including in previous hot spots like Italy and Spain, but a return to recession could change that in a hurry.
A likely reduction in trade with Russia as a result of tensions in Ukraine will only worsen matters. On the other side of the coin, the Euro has retreated from recent highs, which should boost exports. There’s no reason to panic about Europe, but it is a critical region that is worth watching.