BOJ, Sterling, Greece & Oil Under Spot Light | Tesco Beats Sales Estimates
European stocks are ignoring the butchery we experienced in the US equity which was triggered with FANG stock. This was
mainly on the back of two key fundamental reasons. Firstly, the central banks around the globe tightening their screws
on the liquidity taps. Finally, in some circumstances, such as the US, the instability in the economic data is being
confused with transitory weakness. The NASDAQ index has lost its thunder and given that it was mainly tech sector which
usually outperformed other sectors, the fear of matter going ugly is pushing investors to cash in their profits.
No Colour Injected By BOJ, It Remains on Autopilot
Kurado stayed away from da Vinci painting brush and did not add any colour. The Bank of Japan kept its monetary policy
on autopilot today. The bank is under pressure to follow the path of the ECB and the Fed, given the sheer size of its
balance sheet. However, for now, they decided to keep everything unchanged. The bank still wants to see more improvement
in private consumption and they think this is not the time to shift ground- at least for now. The policy balance rate
was maintained at -0.1% and it could still expand its purchases up to 80 trillion yen.
Traders kept the Japanese yen on their sell list. The high of 112.07 is under their target while the support is at
108.93 which is the monthly low.
Sterling May Have Another Stab At Its Resistance
The sterling rebounded as investors reacted to the new hawkish member's decision in the MPC committee members. The three
hawkish members reason that it is about time that the BOE should start normalising the interest rate. Inflation has
strapped the consumer spending and the retail data was horrible. The governor of the Bank of England is facing more and
more uncertainty and it would be equivalent of a catastrophe if he rushes into any hasty decision. In other words, the
BOE’s interest rate hike day is not in this year’s calendar. Investors would remain quick in taking the profit off the
table if we continue to fail the resistance of 1.2820. Failing to break the resistance of 1.2820 would confirm the
downward bias.
Back in the UK, Theresa May is still trying to put all the broken pieces together and forming a coalition with Northern
DUP party remains on top of the bucket list. The deal she is brokering with the DUP party could include that the UK
would not be required to stay in the EU single market which means that she is trying to establish a more stronger
position in a relative perspective before she ignites the negotiation process next week.
No Greek Summer Theatre
Over in Europe, the thoughts of Greek saga not derailing the markets further is the silver line which we could see.
Lately, summer has been associated with a rough and tough battle between lenders and creditors. However, to save
everyone trouble, the EU and the IMF decided not to put the theatre camp up and actually addressed the issue in a timely
fashion.
Oil Traders Reacted to IEA Forecast
After touching the seven-month low, the black gold is finding some strength as bargain hunters think it may be the time
to dip their toe. The IEA statement in which they confirmed that OPEC’s rival will produce more oil than the demand and
growth in the next year would keep investors cautious. The statement was a hint to OPEC that they need to cut their
production more to balance the market or sit with US shale producers to have a joint agreement towards the oil supply.
Tesco Beats Sales Estimates
Tesco has surprised investors today by maintaining its resistance in raising prices which boosted its sales growth to
the strongest level which is not seen in nearly seven years. The company has cut corners in reducing its cost but
battled hard in not raising prices which is the key element to keep the tills ringing. It is an encouraging sing that
their domestic same store surged by 2.3 percent in the face of rising inflation. The discount supermarkets such as Aldi
and Lidl would keep the competition harsh in luring customers who are facing stagnant wages. It is important to keep in
mind that investors are not going to keep jumping in buying the stock blindfolded because discounters are in much better
position still and investors would continuously need assurance that Tesco could continue to resurge its growth.