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Weekly financial market overview 26.07.-01.08.

News - August 2, 2021

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Konstantins Goluzins, CFA



Head of Asset Management
Phone.: (+371) 6700 0456
E-mail: trust@bib.eu

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Main events of the previous week

The International Monetary Fund has issued a warning that while the global economic recovery continues, the gap between prosperous countries and countries with developing and emerging markets is widening. Experts have left the latest forecast of global economic growth at 6% this year, but its structure has changed, which is due to a much more restrained assessment of the prospects for Asian countries. Next year, global GDP growth is expected to reach 4.9%. The IMF proposes to allocate 43 billion euros in order to guarantee an additional 11 billion doses in the medium term. Experts point out that forecast revisions are largely a consequence of differences in the dynamics of the pandemic. In many wealthy countries, 40% of the population is already vaccinated, while in developing countries this figure does not exceed 11%. The highest economic growth in the current year is observed in the United States. The IMF says policy decisions are another reason for widening the gap. Due to state support measures, the forecast for the Eurozone countries has also been revised for the better. Due to the reduction in government investment, the forecast for China was lowered.

The US Federal Reserve has kept its benchmark interest rate at 0-0.25% and believes that it would be advisable to maintain this range until conditions in the labor market reach levels corresponding to the estimates of maximum employment, and the growth of inflation - target 2%. The Fed noted that, thanks to progress in vaccinations and strong political support, indicators of economic activity and employment continued to strengthen. The sectors hardest hit by the pandemic are also seeing improvement, but have not fully recovered. Inflation has risen, largely due to transition factors. The American regulator intends to continue buying Treasury bonds for at least $80 billion monthly, as well as mortgage-backed securities (MBS) for at least $40 billion monthly.

Economic data

Eurozone. According to preliminary calculations, GDP in the second quarter grew by 13.7% year over year (compared to the second quarter of 2020), while GDP growth compared to the first quarter of 2021 was 2%.

The consumer price index in July fell by 0.1% versus June, while the annual inflation rate was 2.2%. The growth of the core inflation rate, excluding food and energy resources, amounted to 0.7% y/y in July.

The unemployment rate in June fell by 0.3 percentage points and amounted to 7.7%.

US. According to preliminary calculations, GDP in the second quarter grew by 6.5% year on year (compared to the first quarter of 2021), while GDP growth was projected in the second quarter of 8.5% y/y.

The number of initial jobless claims for the week was registered in the amount of 400 thousand, which is 24 thousand less than the week before and 20 thousand more than predicted by analysts.

The volume of orders for durable goods in June increased by 0.8% versus May, in turn, the growth of the basic indicator, which does not include civil aviation, amounted to 1%.

In June, the level of personal income increased by 0.1% mom, while the level of personal spending increased by 1% in June.

Key events this week 

  • On Wednesday, the final results of the state of the business sector in July in the Eurozone, the United States and China will become known, while the United States will also report on changes in oil reserves for the week.
  • On Thursday, the US is to publish data on the trade balance for June, as well as the number of initial jobless claims for the week.
  • On Friday, the US will report on the state of the labor market for the month of July.

The information provided herewith has an informative nature. This information cannot be regarded as an offer or recommendation for purchase, storage or sale of securities, or as an investment recommendation, an investment survey or a consultation on investments, or a recommendation to entrust management of your assets to the specific investment manager. The Client is fully aware and undertakes all risks involved in the investment. This information is prepared by AS Baltic International Bank.

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