17 July 2018 ( Lagos ) : Dow Jones Industrial Average managed to inch 0.2% higher supported by the financials that ended the day 3% higher. Investors appear to have shrugged off the meeting between presidents Trump and Putin, as well as warnings from the IMF that rising trade tensions could cost the global economy $430 billion.  

Financial markets seem to be focusing on earnings, which have so far managed to demonstrate a strong performance as has economic data, with U.S. retail sales rising 0.5% in June. This indicates that consumers remain in good health and are supporting further economic growth. Unless trade war announcements break out again, we think fundamentals will remain strong enough to support further gains in U.S. equities.

Later today, attention will be on Federal Reserve Chair Jerome Powell as he testifies before Congress. It will be interesting to hear his views on the flat yield curve and whether he shares Neel Kashkari’s opinion that the U.S. economy may fall into a recession if short-term yields rise above the long-dated ones, indicating that the Fed needs to slow down the pace of tightening policy. However, trade tensions and fiscal policy are the two critical topics where Democrats will likely attack the Fed Chair and clarify whether the Federal Reserve has the necessary tools to avoid any disruption.

In the U.K., the focus will be shifting from politics to economic data, with the latest releases of employment and wages figures due today. Unemployment is expected to remain steady at 4.2%, while wages are expected to slip by 0.1% to 2.7%. A surprise to the upside may increase the odds of an interest rate hike in August and thus provide Sterling with some support.

Source: Hussein Sayed, Chief Market Strategist at FXTM

Reporting for EasyKobo on Tuesday, 17 July 2018 in Lagos, Nigeria