Global stocks had their best week in more than three months last week after Greece and its creditors finally reached agreement on a new financial bailout deal and Chinese stocks continued to rebound.
In the U.S., NASDAQ soared 4.3% to close the week at another new high. The tech-heavy index got a big boost on Friday after Google soared 16%, boosting the company’s market capitalization by a record one-day total of $65.1 billion after reporting record quarterly earnings, beating analysts’ estimates for the first time in nearly two years. The S&P 500 gained 2.4% for the week while the Dow rose 1.9%. Bonds weren’t left out of the rally, as the Barclays U.S. Bond Market Aggregate rose 0.4%. The yield on the 10-year Treasury note fell five basis points on the week to 2.35%.
European stocks were the best performers of the week, at least in local currency terms, as Greece came to terms with its lenders. The broad-based Stoxx Europe 600 jumped 4.3%, its best weekly gain this year, while Germany’s DAX index rose more than 3%. Greece, if grudgingly, agreed to austerity measures, including budget cuts and tax increases, demanded by its creditors for a new bailout deal, basically ensuring the country’s continued membership in the euro zone. The European Central Bank increased emergency lending to Greek banks, enabling them to reopen Monday after remaining shut since June 29. But the euro was lower, dropping nearly 3% against the dollar to $1.08, its lowest level in three months.
Asian shares also had a good week, as China rebounded for a second straight week. The Shanghai composite rose 2% after gaining 5% the previous week. Chinese markets got a boost from the economy, which rose at an annual rate of 7% in the second quarter, slightly ahead of estimates. Hong Kong stocks also rebounded by 2% after falling six of the past seven weeks. But Japanese stocks were the best performers as the Nikkei 225 rose 4.4%, erasing the previous week’s 3.7% drop. Indian stocks rose nearly 3%, their fourth increase in the past five weeks.
Janet Yellen’s reiteration that the Federal Reserve is likely to start interest-rate liftoff before the end of the year failed to dampen the euphoric mood. In her semiannual testimony before Congress last Wednesday, the Fed chair said, “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target.” She added that the Fed expects economic growth “to strengthen over the remainder of this year and the unemployment rate to decline gradually.” Although that wasn’t the case last week, as reports on the U.S. economy were mixed. Retail sales fell an unexpected 0.3% versus expectations of a 0.3% increase while the previous two months’ results were revised downward slightly. Housing starts jumped nearly 10% in June, but that was skewed by a 29% increase in multifamily units; starts on single-family units, which make up almost two-thirds of the market, fell nearly 1%. Building permits, a leading indicator, rose 7.4%. Industrial production rebounded 0.3% after declining 0.2% in May. The Fed’s monthly Beige Book showed that economic activity expanded in all 12 Fed districts from mid-May through June. Weekly unemployment claims fell for the first time in a month, falling 15,000 to 281,000. Inflation was slightly higher in June but remained subdued on a year-ago basis.
Reports/dates/facts/links worth paying attention to over the next week:
- July 22: Existing home sales for June.
- July 23: Weekly unemployment claims; Chicago Fed national activity index for June; leading economic indicators for June.
- July 24: New home sales for June.
Copyright © 2015 by Wright Investors’ Service, Inc. The views expressed in this blog reflect those of Wright Investors’ Service, Inc. and are subject to change. Statements and opinions therein are based on sources of information believed to be accurate and reliable, but Wright Investors’ Service, Inc. makes no representations or guarantees as to the accuracy or completeness thereof. These views should not be relied upon as investment advice.