Despite a turbulent Friday the major averages delivered small gains this week, save for the tech heavy Nasdaq. While yields fell on the week the rising trend and widening spreads with corporate bonds lifted Financials this week.
Another week has gone by without a deal between Greece and its creditors. Despite supposed progress on a piecemeal reform package offered by Chancellor Merkel Prime Minster Tsipras remains difficult to bargain with, forcing the IMF to pull out of negotiations this week. A deal within the next week is needed to comply with Parliamentary schedules.
In Asia, Chinese authorities published poor trade data this week while South Korea lowered interest rates for the second time this year in a bid to boost competitiveness. In Japan, Governor Kuroda stated he saw little reason for the Yen to fall further in 2015, instigating a reversal in the currency. Japanese GDP for Q1 was revised up from 2.4% to 3.9%
Greece missed its payment to the IMF due on Friday in the amount of roughly €300 million. Greece’s agreement with the IMF allows for payments due during the same month to be bundles, saving Greece the official label of default. Despite public rhetoric, officials are said to be privately optimistic about a new deal being agreed to next week.
U.S. economic data for the week was encouraging, continuing a recent trend. Consumer Sentiment, the Producer Price Index and Retail Sales all were reported stronger than expected. The improving data is lifting expectations for Q2 GDP growth. Average expectations forecast a rise of 2.5% to 3%.
The World Bank released its expectations for global growth this week, citing concern regarding weakness in emerging and developing markets. The institution stated that these economies were becoming a less reliable engine of economic growth. Concurrently, the IMF publicly pleaded with the Fed to delay increasing rates until 2016, citing poor global fundamentals for deals with a rate rise.