Weekly Market Review: Big Ben Chimes In

Monday 22nd July 2013

Ben Bernanke’s testimony was billed as the top event of last week, but mercifully it resulted in

few fireworks on Wall Street.

The Federal Reserve chief reiterated his prior themes and stressed that any reduction in stimulus

is still highly dependent on economic data.

If anything, there was an ever-so-slightly more dovish edge to his comments. The U.S. 10-year

Treasury bond, which tumbled back in June, has now recouped its entire loss.

Week Ending 19th July 2013 – Markets at a Glance

Round-up:

• As mentioned above, Ferderal Reserve Chief Ben Bernanke gave a much anticipated testimony

last week. To be honest, much of it simply rehashed previous commentary, with a slightly more

dovish angle. For example, while he expects Quantitative Easing (QE) to end mid 2014, this will

only happen if the economic data is strong enough. In addition, he stated that he expects the

Federal Reserve to keep its benchmark interest rate near zero for a “considerable time” after QE

ends.

• China's annual GDP growth rate slowed to 7.5% in the second quarter from 7.7% in Q1,

matching consensus estimates. That puts the average 2013 growth rate so far at 7.6%, just above

the government's official growth target of 7.5%. Yes, this is far faster that developed nations;

however it is some way off the double-digit pace that we saw a few years ago.

• Staying in China, Foreign direct investment rose at the fastest pace in two years in June,

advancing 20.1% year over year. Economists had only expected a 0.7% increase after FDI rose

0.3% in May. Investment from the United States rose 12.3%, while investment from Europe rose

14.7%.

• Spanish opposition leaders turned up the pressure on Prime Minister Mariano Rajoy to resign

after Spanish newspaper El Mundo published text messages linking Rajoy to a slush fund used to

pay off politicians. Luis Barcenas, the former Popular Party treasurer on the other end of the text

messages, told the paper last week that the party has long been financed illegally.

• Here in Poland, CPI inflation fell to just 0.2 percent year-on-year in June, a record-low level.

Economists surveyed by the Polish Press Agency (PAP) had expected June inflation to turn out at

0.3 percent.

• U.K. consumer prices fell 0.2% in June – more than the expected 0.1% decline – after rising

0.2% in May, bringing the annual inflation rate to 2.9% in June from 2.7%. Core consumer price

inflation edged up to 2.3% from 2.2%.

• Eurozone consumer prices rose 0.1% in June, right in line with expectations, leaving the annual

rate of inflation unchanged at 1.6% and core inflation unchanged at 1.2%. The eurozone trade

surplus fell to €14.6 billion in May from €15.2 billion in April, defying consensus expectations

for a rise to €16.2 billion.

• The German ZEW survey of economic sentiment unexpectedly slipped to 36.3 from June's 38.5

index reading. Economists were looking for the survey's headline index to increase to 40,

indicating rising confidence. The wider eurozone ZEW survey headline index, on the other hand,

increased to 32.8 from last month's 30.6 reading.

• JPMorgan Chase, Citigroup, Bank of America, Goldman Sachs and Morgan Stanley made a

combined $17.6bn when they reportedsecond-quarter net income in the past week. That is the

best performance since the same period six years ago.

• The minutes from the Bank of Japan's latest monetary policy meeting showed that the central

bank was confident in the Japanese economic recovery. However, the minutes also revealed

disagreement inside the central bank over measures related to the extension of its long-term fixed

rate lending program. Though designed to curb volatility, members asserted that extending the

program would send the wrong message to market participants that the BoJ was revising its

monetary policy framework.

• The minutes from Governor Mark Carney's first monetary policy meeting at the helm of the

Bank of England revealed that the Monetary Policy Committee voted 9-0 against increasing

quantitative easing. The minutes said that although "an expansion of the asset purchase

programme remained one means of injecting stimulus ... the Committee would be investigating

other options during the month, and it was therefore sensible not to initiate an expansion at this

meeting." The Pound strengthened on this news.

• The U.S. has levied a $435 million fine against Barclays for alleged energy price manipulation

in California and other parts of the western U.S. between 2006 and 2008. The four traders named

in the case are responsible for $18 million in fines.

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