ECB is inching toward stimulus exit
The euro (FXE) closed the week at 1.1196 to the US dollar (UUP), posting a 0.76% loss compared to the previous week. The ECB (European Central Bank) policy meeting turned out to be a non-event with no surprises. The ECB confirmed that there would not be any future rate cuts and removed the easing bias. It failed to signal any tapering of its stimulus program, but that doesn’t change the view of the tapering to begin early next year. The takeaway from this month’s meeting is that the ECB is not yet ready to commit to removing the stimulus and is preferring to hold on to the stimulus insurance. ECB chair Mario Draghi will have to begin the process of tapering and will be preparing the markets for an eventual lift-off.
European equity indexes (VGK) posted marginal losses last week, despite the negative surprise from the UK elections. The German DAX (DAX-INDEX) closed at 12,816, posting a loss of 0.06% last week, and the SPDR Euro Stoxx 50 ETF (FEZ) posted a weekly loss of 0.24%.
Speculative positions on euro continue to rise
Economic data from the Eurozone continue to improve with notable upticks in Europe’s GDP and Germany’s industrial production. According to the Commitment of Traders report published on Friday, June 9, 2017, traders have increased their speculative positions and continue to remain net long on the European currency. The total speculative positions increased to 74,009 contracts compared to 72,900 contracts in the previous week.
Key economic data and the Brexit to drive the euro
The final inflation numbers for May and the German ZEW investor confidence could be key data releases this week. Political challenges continue to remain despite British Prime Minister Theresa May’s managing to secure the support of the DUP (Democratic Unionist Party). It’s unclear if the Brexit negotiations, which are scheduled to begin this month, will lead to a hard or soft Brexit. Overall, the euro is likely to remain a positive play for the week ahead.
In the next part of this series, we’ll see how the British pound has reacted to the UK elections.
The Japanese yen (FXY) ended last week at 110.30 against the US dollar (UUP) and close to the previous week’s close of 110.42.
Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.
The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.
Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.
Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.
As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.
Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.