Summer slump is casting its shadow

Market report Michael Blumenroth – 22.07.2016

Weekly market report

Prior to my weekly commentary, I would like to let you know that you, dear readers, will have to do without me for the next two weeks. As a bank employee, I am required to take a two-week holiday once a year. Although I will be spending part of it at home, I am not allowed to work during this time. But maybe it isn’t such a bad time for a vacation. Exchange turnover and daily volatility have fallen to very modest levels, strikingly so on the stock markets. In the US, the Dow Jones Industrial Average Index as well as the S&P500 took baby steps to new record highs every day from Monday to Wednesday, but the extent of their daily movement was extremely limited. Nevertheless, it does show the slightly higher risk readiness of market participants.

The impact of the looming Brexit is currently insignificant, with the DAX® once again reaching its pre-Brexit level. Corporate quarterly results published thus far have been for the most part pleasing. The geopolitical risks are currently being somewhat tuned out on the markets. Overall, this caused stock prices to rise and market participants to exit so-called safe havens, a fate which also hit the gold price temporarily. A week ago today, the precious metal traded at 1,332 US$/ounce and had climbed to 1,339 US$/ounce by Friday evening. Following uninspiring sideways trading on Monday and Tuesday, the gold price came under pressure and fell to its weekly low of 1,311 US$/ounce on Thursday night. From there, it steadily recovered and currently trades at 1,326 US$/ounce – an overall modest trading margin.

Due to the euro’s slumping against the US dollar, Xetra-Gold was able to increase in value. Traded at 38.50 €/gram last Friday morning, it rose to a weekly high of 38.95 €/gram on Monday and started trading this morning at 38.70 €/gram. 

During the next two weeks, the central bank meetings and their ensuing monetary policy decisions will dominate the markets, to be published in the US on 27 July, in Japan on 29 July and in England on 4 August.  For Japan and England, a number of market participants expect further easing measures (such as lower interest rates) and eagerly await the US employment report data on 5 August.

I wish you all beautiful summer, hopefully with the chance to soak up some sun, and I will be back on 12 August.  

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