By Darrell Jobman, Editor-in-ChiefTraderPlanet.com
Conditions within the global economy was an important focus over the week as unease over conditions increased with further weak data from the Euro-zone while there was also evidence of weaker trends in key economies such as China.
Commodity prices were generally lower over the week which pushed the Australian dollar to one-month lows with some speculation that the Reserve Bank could switch to an easing bias. Evidence of weakness in the global economy also contained selling pressure on the yen.
The US economic conditions also remained a key focus. There was a small recovery in consumer confidence for July with the index rising to 51.9 from a revised 51.0 the previous month. This maintained the slightly firmer data tone seen in the durable goods orders and new home sales seen at the end of last week, but there were fresh doubts as the week progressed.
GDP growth for the second quarter was recorded at 1.9% following a 0.9% increase the previous quarter, but this was below expectations and the domestic economy was weak while the 2007 fourth-quarter estimate was revised to show a contraction.
The Chicago PMI index rose to 50.8 for July from 49.6 the previous month and this was the first reading above the 50.0 level for six months which provided some relief.
The latest Case-Shiller house-price index recorded a 15.8% decline in prices in the year to May. This was slightly better than expected and 7 of the 20 cities recorded an increase in prices for the month which offered some hopes for stabilization.
Source: VantagePoint Intermarket Analysis Software
German inflation estimates remained at an elevated level with the provisional inflation estimate at 3.3%. The flash Euro-zone consumer inflation rate also rose to 4.1% for July from 4.0% previously. There were reports from ECB sources that interest rates could be increased again if inflation failed to decline, but overall market confidence in the economy deteriorated as business and consumer confidence continued to deteriorate sharply.
There was some media speculation that Italy could be forced to leave the Euro-zone if the downturn intensified while the Spanish data remained extremely weak with a decline in retail sales of over 10% in the latest month.
The dollar secured a net advance over the week and pushed to a three-month high on a trade-weighted basis. It initially failed to hold its best levels as doubts over the US economy persisted following mixed data, but moved back to 1.5530 from 1.57.
The UK housing related data remained weak with mortgage approvals falling to a fresh record low of 36,000 for June from 41,000 the previous month. The latest Nationwide house-price index also recorded a further 1.7% decline for July with the annual drop of 8.1% the weakest for at least 15 years.
Consumer orientated releases were also weak with a drop in bank lending while the latest CBI retail survey recorded a net balance of 36% of respondents reporting lower sales which was the lowest reading for at least 25 years. There was extreme weakness in the housing-related areas while the PMI index for the manufacturing sector fell to a 10-year low of 44.3 in July from 45.9.
Sterling still proved resilient against the Euro given the Euro-zone growth fears and consolidated around 0.7865 while there was a decline to 1.9750 against the dollar.
