The U.S. GDP grew at only 2.1% from April through June after a 3.1% gain in Q1. At first sight, this figure is not a good news as it signals a slowdown in economic expansion. However investors preferred to see the glass as half full, as this growth rate is eventually better than expected (compared with a 1.8% estimate) and the surge in personal consumption expenditures (4.3% vs. 4.0% expected and 0.9% in Q1) partially offset downturns in inventory investment, exports, and nonresidential fixed investment. Furthermore, the second quarter earnings season has got off to a good start, with nearly 75% of the S&P 500 companies that have reported so far topping earnings expectations even though analysts were worried about the impact of slowing global growth and trade war on corporate profits.
These positive tailwinds sent the stock markets higher. The S&P 500 and Nasdaq Composite indices closed at 3,025.86 and 8,330.21 respectively (+1.65% and +2.26% WTD). Communication services, financials and information technology stocks led the pack. Energy lagged behing though WTI crude oil rose 1.02% WTD to $56.20 a barrel.
European and Asian markets also took advantage of this upturn (MSCI EMU up 1.49%, Nikkei +0.89%, Shanghai Composite +0.70%) even if Mario Draghi’s comments underwhelmed market participants. In addition, the “flash” reading for IHS Markit’s PMI for the Eurozone manufacturing sector fell to its lowest in six years!
U.S. Treasury yields inched up (from 2.05% to 2.08% for the 10-Year T-note yield) while the German 10-Year Bund yield continued to fall from -0.32% to -0.38%. Investment grade corporate bonds and high yield bonds fared well in Europe. Emerging debt slipped after 9 weeks in positive territory.
Find the full report here : https://www.trackinsight.com/weekly-flow-report/2019-07-26/global
