Another week of positive performance for U.S. equities comes in the midst of earnings season. So far, corporate profits have come in stronger than analyst expectations but still seem to be on track for the sixth consecutive decline. Of relief to market watchers is the fact some of the more cyclical sectors, such as Technology, are participating and leading the rally.
The first look at post-Brexit economic data does not look good for the U.K. economy. The composite PMI, a current measure of economic activity, fell at its fastest pace since 2009 and is already showing a contraction of approximately 0.4% in GDP for Q3.
Tracking data from the Atlanta Federal Reserve Bank suggests households increased their consumption over 4.5% during Q2, the fastest rate since 2006. Economists and market professionals have been waiting for consumers to lead the economy ever since gasoline prices collapsed in late 2014.
The Yen reached its lowest levels in six weeks as the latest estimates out of Japan suggest a fiscal stimulus package of ¥20 Trillion, double previous estimates. Expectations for some sort of action are high with PM Abe having full control in both houses of the legislature.
Similarly, Chinese officials were quoted on multiple occasions this week on the state’s capacity to expand its current fiscal deficit from 3% to between 4-5% as a way of ensuring the country’s growth target is met.
Italy is working to put together a €50 billion bad bank plan in an effort to clean up its banking system. Most private estimates however suggest the sum wouldn’t be enough to cover one bank, let alone the entire system. The country and EU remain at odds over how to create a structure where public and private sources both aid banks.