Top Stories Last Week
• US Stock Markets Suffered the Worse Weekly Drop in A Year
US equities suffered the worse weekly drop in a year, amid disappointed forecasts from Walmart and Cisco and fears of Fed tapering as rosier economic data may force the Fed to remove its monthly asset purchases soon. In the week, S&P index declined 2.1%, while MSCI EAFE index dropped 0.2%. The MSCI Emerging Market Index lost 0.8%. However, gold rallied 4.5% while the SPGC commodity index climbed 2.6%. The bond markets were sold off as well. Barclays US Treasury index was down by 1.9%, and US high yield bonds dropped 1.1%.
• US Retail Sales Rose 0.2% in July
U.S. retail sales rose 0.2% in July, pointing to an acceleration in consumer spending that could bolster the case at the U.S. Federal Reserve for winding down bond purchase program. While the reading fell short of analysts’ expectations, a closely-watched category of sales that strips out cars, gasoline and building materials posted its largest gain in seven months, rising 0.5%. These “core” retail sales usually reflect more comprehensive measures of consumer spending, so the report suggests the economy could be regaining steam after tax hikes and federal budget cuts dragged on growth in the first half of the year.
• Euro Zone Recession Is Over?
Bolstered by stronger consumption and investment in Germany as well as growth in France, Europe broke out of recession in the second quarter, ending its longest postwar contraction. But the weak upturn, high unemployment and other problems left open the question of whether the nascent recovery can last. The two biggest economies in the 17-nation euro zone each helped pull the region as a whole out of its doldrums, with Germany posting 2.8% annualized growth in the second quarter and France 2.0%. Over all, gross domestic product in the zone grew 1.2%, exceeding the 0.8% growth forecast by economists.
• US and Euro Zone Consumer Price Indices Rose Moderately
U.S. consumer prices rose a seasonally adjusted 0.2% on gains for gasoline, housing, clothing and food, among other goods. Excluding energy and food, the core consumer-price index also rose 0.2%. Results for the overall CPI and core reading matched the forecasts from economists. Consumer prices have increased 2% over the past 12 months, and the core has increased 1.7%. Observers expect that the Federal Reserve could announce plans to taper its massive bond-buying program as early as September, though there’s been some concern about inflation running too low.
Consumer price inflation in the 17-nation eurozone remained at 1.6% in July. Before July, the CPI had risen for two months in a row in the single currency area which was suffering economic recession and stands the risk of deflation. The largest rises in annual euro area inflation was seen in fruit, vegetables and tobacco prices, while telecommunications, medical and paramedical services and fuels for transport saw the largest falls.
• Walmart Earnings Disappointed Investors
Walmart, the world’s largest retailer, cut its outlook for the rest of the year after reporting second-quarter earnings that fell below expectations. The disappointing performance, coupled with pessimistic forecasts from Macy’s Inc. and Kohl’s Corp. this week, seems to indicate that Americans are stuck in an economic holding pattern. Wall Street had expected Wal-Mart to earn profit of $1.25 a share and $118.1 billion in revenue. Instead, the discount giant said net income rose 13% to $4.07 billion, or $1.24 a share, from $4.02 billion, or $1.18 a share.
• Egypt Military Crackdown Killed Hundreds
Deadly clashes swept Egypt from its southern deserts to the Nile Delta, pushing the Arab world’s most strategically important state toward a prolonged struggle between hard-line military men and Islamists who may be forced underground, only to turn more violent. Security forces in Cairo stormed through clouds of smoke Wednesday to end sit-ins by thousands of supporters of deposed Islamist President Mohamed Morsi. The army-backed interim government offered no plan for reconciliation, and the bloodshed set the country on a dangerous path after more than two years of political unrest.
Top Stories to Watch This Week
• Jackson Hole Symposium
Central banks from all over the world will gather at Jackson Hole Wyoming to discuss economic and monetary policies.
• US Housing Markets
Existing home and new home sales are expected show modest improvements, a further sign of continuing housing recoveries.
• More Earnings Results
JC Penney, Best Buy, Home Depot and TJX will all report earnings throughout the week.