“G20 Summit….”

G20 Summit

World leaders are meeting in Hamburg for the G20 summit with talks starting on Friday with an informal session on terrorism. German Chancellor Angela Merkel will chair the two-day summit.  The agenda will focus on topics such as terrorism, financial regulation, global trade, climate change and the handling of North Korea.  The first official meeting will be held between Presidents Trump and Putin.  On Saturday a meeting between President Trump and Chinese President Xi Jinping is scheduled.

Trump and Putin Talks

The highly anticipated meeting this week of the summit of the Group of 20 shall set the tone for the next four years of US-Russia relations. The range of global issues to be addressed include continuing sanctions against Russia, Putin’s expansionist policies in Ukraine, stopping North Korea’s nuclear weapons programs, managing frictions over Syria and Iran and preventing Russian interference in US and European elections.  Trump also did not rule out raising concerns about cybersecurity and the Russian election meddling which has raised tensions.

US – The Federal Reserve (FED)

The Federal Reserve minutes of the 13-14 June meeting were released on Wednesday at which the US Central bank voted to raise interest rates and also showed that the Federal Reserve policy makers were split in their opinion as to the timing of reducing the Federal Reserve portfolio of $4.2 trillion of Treasury bonds and mortgage backed securities.  During last month’s meeting 8 to 1 voted to increase the benchmark interest rates by a quarter percentage point signaling the confidence of the Federal Reserve in the growth of the US economy.  Some policymakers showed their concern over the Federal Reserve struggle to get inflation back to its 2 percent target.  According to a report by the Commerce Department issued on Friday the Fed’s preferred method of underlying inflation slipped again to 1.4 percent in May which has run below the target for more than five years. The weak level of inflation makes some policymakers uncomfortable in the wake of higher interest rates.

US Private Sector

The ADP (payroll processor) National Employment Report showed private employers added 158,000 jobs in June, below the estimated amount of 185,000. The report acts as a precursor to the monthly nonfarm payrolls data which includes hiring in public and private sectors and which is due on Friday.

US – Factory Activity and Construction

The Institute for Supply Management (ISM) said on Monday that its index of national factory activity rose to a 57.8 in June from 54.9 in May. A reading above 50 in the ISM index indicates an expansion in manufacturing, which accounts for about 12 percent of the overall US economy.  Meanwhile, US construction spending according to the Commerce Department remained unexpectedly flat at $1.23 trillion.  Federal government construction spending jumped 6.4 percent in May to its highest monthly level since January 2013.

United Nations meet on North Korea

North Korea’s rocket launch on 4^th July was its first intercontinental ballistic missile.  The United Nations Security Council held an emergency meeting on Wednesday whilst the Secretary of State Rex Tillerson calls the actions by North Korea “new escalation of the threat” to the US and its allies.  He further called for “global action” to stop “global threat”.  The UN is set to issue a condemnation of the missile test.

Japan

Companies surveyed by the Bank of Japan expect consumer prices to increase 0.8 percent a year from now. Core consumer prices, which include oil products but excludes fresh food prices, rose 0.4 percent in May from a year earlier, marking the fifth straight month of gains and accelerating from 0.3 percent increase in April.

Qatar

The UAE, Saudi Arabia and Egypt accuse Qatar of supporting terrorist groups. Qatar denies all this.  On Monday Qatar submitted a response which the Saudis will study before replying.  The Qatar stock market lost about $15 billion in market value (10 percent) since the start of the boycott on 5 June with 17 of the 19 member on the QE index declining.

Eurozone

The IHS Markit Manufacturing Purchasing Manager’s Index for the Eurozone rose to 57.4 in June increasing from May’s level at 57. This is the highest level since April 2011 and at 50 is a comfortable level separating growth from contraction.  New orders increased at their fastest rate since early 2011, with backlog of work increasing at the fastest pace in over 13 years.  Furthermore, raw materials have been depleted and factories have taken more workers on to deal with the increase in demand.   Input costs have also fallen but manufacturers increased the selling prices sharply.   It seems the momentum will continue.  Growth rates improved in most of the countries surveyed amongst which are Italy and France, while the gauge for Greece signaled expansion for the first time since August last year.  European Central Bank President Mario Draghi has insisted that before withdrawing monetary support he wants to see proof that inflation momentum is sustainable.

Italy

Banca Monte dei Paschi SpA laid out a five year restructuring plan that shall include cutting thousands of jobs and the selling of assets as part of an agreement with the European Union that will let the bank receive 5.4 billion euros in state aid.  On Wednesday the bank said that it plans to reduce the headcount by 5,500, close 600 branches and dispose of 28.6 billion euros of bad loans by 2021. After months of negotiations the European commission approved the restructuring plan after it was found to need state support irrespective of the regulators declaring it solvent.  The bank turned to the state after it failed to raise funding from investors in December.  Monte dei Paschi plans are to improve efficiency and risk management.     The state intervention is the largest since Benito Mussolini seized banks in 1933 including Paschi as part of his wholesale nationalization of the private sector.

UK

The UK manufacturing has slowed more than forecasted in June due to uncertainty over demand, raising doubts about the outlook for the economy according to IHS Markit. The IHS Markit Purchasing Manager’s Index fell to a three month low at 54.3 from a revised 56.3 in May. According to IHS Markit, the rise in factory orders was the weakest in 11 months as growth of new business slowed in both the domestic and export markets.

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