BoJ, ECB and BoE leave monetary policies unchanged

Several of the most important central banks in the world concluded their monetary policy meetings on Thursday, but none initiated any new measures.

The Bank of Japan upgraded its assessment of the economy and said that further policy moves would depend on inflation.

The European Central Bank left its key interest rate unchanged at 0.5 percent with President Mario Draghi telling a news conference that he was “very, very cautious about the recovery” and that he stands “ready to act”.

The Bank of England also left monetary policy unchanged, as did Sweden's Riksbank.

Despite the lack of fresh policy moves from these central banks, global bond yields rose on Thursday as positive economic data from the US suggest that at least the Federal Reserve may be close to slowing its bond purchases.

The Institute for Supply Management said on Thursday that its US services index rose to 58.6 in August, its highest since December 2005, from 56.0 in July.

ADP reported that private employers in the US added 176,000 jobs in August.

In another sign of an improving US labour market, new claims for jobless benefits fell 9,000 last week to 323,000 and the four-week moving average fell 3,000 to 328,500, its lowest since October 2007.

Dampening some of the optimism on the US economy, though, was a 2.4 percent fall in new orders for manufactured goods in July, the most in four months.

Also seeing a fall in factory orders in July was Germany, where orders fell 2.7 percent. However, this was mostly a reversal of the boost that orders received in June from the Paris Air Show, when orders had jumped 5.0 percent.

Europe out of recession, China and US maintain growth

A report on Wednesday confirmed that the eurozone economy grew 0.3 percent in the second quarter to bring its recession to an end. Exports to the rest of the world rose sharply in the quarter after falling for six months, while government spending made its first positive contribution to the economy since late 2009.

Another report on Wednesday showed that retail sales in the euro area rebounded 0.1 percent July after having fallen 0.7 percent in June.

In another sign of recovery in the euro area, Markit reported on Wednesday that its composite index for the region rose to 51.5 in August from 50.5 in July, with the service sector index rising to 50.7 from 49.8.

Outside the euro area in Europe, the UK reported yet more strong data on Wednesday. The Markit/CIPS UK services PMI rose to 60.5 in August, the highest since December 2006, from 60.2 in July, marking the first back-to-back readings above 60 since 1997.

Elsewhere in the world, China's services sector also showed signs of improvement in August. The Markit/HSBC services PMI for China rose to 52.8 last month from 51.3 in July.

Meanwhile, the US economy maintained a “modest to moderate” pace of expansion from early July through late August, the Federal Reserve reported in its Beige Book on Wednesday.

Indeed, the US trade deficit widened in July as improving demand led to a 1.6 percent increase in imports. Exports fell 0.6 percent though.

OECD sees improved outlook for advanced economies

The Organisation for Economic Cooperation and Development said on Tuesday that the economic outlook for advanced economies is improving.

The US is expected to lead with growth of 1.7 percent this year, although that is down from the OECD's May forecast of 1.9 percent. Japan is expected to grow 1.6 percent, unchanged from the OECD's May forecast.

Europe is now expected to join the recovery, with Germany seen growing 0.7 percent and France 0.3 percent, although Italy is still expected to contract.

Outside the euro area, the UK is expected to grow 1.5 percent, sharply up from the May forecast of 0.8 percent.

However, apart from China, which is expected to grow 7.4 percent this year, the OECD sees a slowdown in many emerging countries.

Economic data on Tuesday were mostly consistent with the OECD's outlook.

In the US, the Institute for Supply Management reported that its US manufacturing PMI rose to 55.7 in August, its highest since June 2011, from 55.4 in July.

Markit's US manufacturing PMI was not as strong, falling to 53.1 in August from 53.7 in July.

Another report from the US on Tuesday showed that construction spending rose 0.6 percent in July.

Meanwhile, the UK added to its recent string of strong economic data on Tuesday. The Markit/CIPS construction PMI rose to 59.1 last month, its highest level since September 2007, from 57.0 in July.

However, China's services activity eased a little in August. The National Bureau of Statistics reported on Tuesday that its non-manufacturing PMI fell to 53.9 last month from 54.1 in July.

Markets rise as manufacturing expands in Europe and China

After a turbulent August, markets made a positive start to September on Monday as data from Europe and China indicated expansion in manufacturing activity.

The MSCI All-Country World Index rose 0.6 percent. The STOXX Europe 600 Index in particular jumped 1.9 percent, the most in eight weeks.

A report from Markit on Monday showed that its manufacturing PMI for the euro area rose to 51.4 in August, the highest in 26 months, from 50.3 in July.

UK manufacturing performed even better. The Markit/CIPS manufacturing PMI jumped to 57.2 last month, the highest in 18 months, from 54.8 in July.

Also showing improvement, albeit more modestly, was China's manufacturing sector. HSBC's manufacturing PMI for China rose to 50.1 in August from 47.7 in July, thus indicating an end to three months of contraction.

The HSBC data on Monday followed a report on Sunday from the National Bureau of Statistics that showed the latter's manufacturing PMI for China hitting a 16-month high of 51.0 in August from 50.3 in July.

Japanese economy looking better again

After reporting some weaker economic data earlier this month, the Japanese economy is starting to look better again.

The Finance Ministry reported on Monday that capital spending was unchanged in the second quarter compared to the previous year. This was an improvement over the 3.9 percent decline in the first quarter.

Excluding software, capital spending rose 1.4 percent in the second quarter over the previous year after having fallen 5.2 percent in the first quarter.

Economic reports last Friday had also been positive.

Household spending rose 0.9 percent in July.

The unemployment rate fell to 3.8 percent in July from 3.9 percent in June.

Consumer prices excluding fresh food rose 0.7 percent from a year earlier, the biggest increase since November 2008.

Industrial production rose 3.2 percent in July after having fallen 3.1 percent in June.

And the Markit/JMMA manufacturing PMI rose to 52.2 in August from 50.7 in July, with output rising at the fastest rate in 30 months.

US report mixed data as Europe shows more signs of recovery

US economic data on Friday were mixed.

Consumer spending rose 0.1 percent in July, down from a 0.6 percent increase in June. Income also rose 0.1 percent in July, down from a 0.3 percent gain in June.

Adjusted for inflation, consumer spending was unchanged in July.

A deterioration in consumer sentiment in August also suggests slowing in consumer spending. The Thomson Reuters/University of Michigan final index of consumer sentiment fell to 82.1 in August, a four-month low, from 85.1 in July.

More positively, the Chicago Business Barometer rose to 53.0 in August from 52.3 in July.

Meanwhile, data from Europe on Friday provided more signs of recovery.

The economic sentiment indicator for the euro area rose to 95.2 in August, the highest in two years, from 92.5 in July.

Inflation slowed to 1.3 percent in August from 1.6 percent in July.

The unemployment rate for July was unchanged though at a record high of 12.1 percent.

In the UK, the GfK consumer confidence index rose 3 points to minus 13 in August, the highest in almost four years. Mortgage approvals rose to the highest in more than five years in July and the Nationwide Building Society reported that house prices rose 0.6 percent in August.

Japanese consumer prices and industrial production rise, US growth revised up

Japan's economic recovery appears to be back on track, with even inflation making a return, according to data released on Friday.

Core consumer prices, which exclude fresh food prices, rose 0.7 percent in July from the previous year, the biggest increase since November 2008.

Industrial production rebounded 3.2 percent in July after falling 3.1 percent in June while the unemployment rate fell to 3.8 percent from 3.9 percent in June.

Household spending rose 0.9 percent in July.

The positive data from Japan follows an upward revision to second quarter US GDP growth on Thursday. The US economy is now estimated to have grown at an annual rate of 2.5 percent, up from an initial estimate of 1.7 percent.

Thursday had also seen another emerging economy central bank tighten monetary policy following recent turbulence in emerging markets. In an extra policy meeting on Thursday, Bank Indonesia announced a 50-basis-point hike in its key interest rate to 7.00 per cent, its third hike in three months.

US pending home sales and German consumer confidence fall, Brazil raises interest rate

Following Tuesday's positive economic data from the US and Germany, reports on Wednesday took a negative turn.

In the US, the housing market produced more signs that it has cooled. Pending home sales fell 1.3 percent in July, the most this year and after a 0.4 percent decline in June.

In Germany, consumer confidence has slipped. GfK's consumer confidence index for September fell to 6.9 from 7.0 in August.

Weaker growth in the developed economies may not be the main concern of policy makers in emerging economies at the moment though.

On Wednesday, Brazil’s central bank raised its benchmark interest rate by half a percentage point for a third straight meeting to 9.0 percent. This move came after the real fell 10 percent in the last three months.

Economic data positive, stocks fall

Economic data on Tuesday were positive.

US home prices continued to climb in June despite higher mortgage rates. Prices rose 12.1 percent from a year ago in June, slightly down from the previous month's 12.2 percent gain, according to the S&P/Case-Shiller composite index of 20 metropolitan areas. On a seasonally adjusted basis, home prices rose 0.9 percent.

Meanwhile, US consumer confidence has also been rising. The Conference Board's consumer confidence index rose to 81.5 in August from 81.0 in July.

In Germany, the Ifo business climate index rose to 107.5 in August from 106.2 in July, adding to signs that economic recovery is taking shape in Europe.

However, in the markets, the positive economic data were overshadowed by a jump in oil prices amid concern that the US will take military action against Syria. Crude oil rose 2.9 percent on Tuesday while the MSCI All-Country World Index fell 1.4 percent.

US durable goods orders fall sharply

The outlook for the US economy dimmed a little after a report on Monday showed that durable goods orders fell 7.3 percent in July, the first decrease in four months and the biggest since August 2012.

The fall was mostly due to a 52.3 percent plunge in commercial aircraft orders. However, even excluding transportation equipment, orders fell 0.6 percent.

Orders for non-defense capital goods excluding aircraft fell 3.3 percent in July, the biggest decrease in five months.

Investors mostly shrugged off the weak report though. US stocks fell late on Monday only after Secretary of State John Kerry said the president will hold Syria’s government accountable for using chemical weapons.

The S&P 500 ended the day down 0.4 percent.

Baby Boomers to curb rise in US bond yields

US Treasury yields may have gone up recently in anticipation of the Federal Reserve tapering its bond purchases but over the longer term, this Bloomberg article says that Baby Boomers will help keep yields down.

Baby Boomers’ influence on U.S. Treasuries will help hold yields down as people born in the initial decades after World War II shift to fixed-income assets to prepare for retirement, mirroring a pattern in Japan.

The CHART OF THE DAY shows Treasury yields have gradually declined as the proportion of U.S. citizens over 65 years climbed. The age group will swell to 20 percent of the population by 2030 from 14 percent now, according to the U.S. Census Bureau. The chart tracks a similar trend in Japan, where 24 percent are over 65 years, the world’s highest ratio of seniors, up from 19 percent a decade ago.

Bloomberg's Chart of the Day

Europe shows more signs of recovery but US new home sales fall sharply

There were more signs on Friday that Europe's economy is recovering.

Germany confirmed that its economy grew 0.7 percent in the second quarter, its fastest growth rate in more than a year. Britain's second quarter growth was revised up to show the same increase as Germany's.

Confidence in the euro area is also returning. The consumer confidence indicator for the euro area rose to -15.6 in August, the highest level since July 2011, from -17.4 in July. Belgium's business confidence index rose to -8.6 in August from -12.0 in July.

In contrast, data from the US on Friday were negative.

US new home sales fell 13.4 percent in July even as the government revised its estimates for May and June lower. The sharp fall in July brought the annual rate of sales to 394,000 units, the lowest level in nine months.

US and European markets rise amid positive economic data

Markets rose on Thursday, shrugging off concerns of an impending reduction in monetary stimulus from the Federal Reserve. The S&P 500 rose 0.9 percent while the STOXX Europe 600 rose 1.0 percent.

Earlier on Thursday, however, Asian stocks had fallen. The MSCI Asia Pacific Index declined 0.8 percent, with the Shanghai Composite falling 0.3 percent.

The decline in Chinese stocks came despite a report from HSBC on Thursday showing that its manufacturing PMI for China rebounded to 50.1 in August from 47.7 in July, indicating an end to contraction.

Also showing an end to contraction on Thursday was services activity in the euro area. Markit's services index for the euro area rose to 51.0 in August from 49.8 in July. With the manufacturing PMI also rising to 51.3 from 50.3, the eurozone composite index rose to 51.7 in August from 50.5 in July.

Meanwhile, US manufacturing activity maintained its expansion in August. Markit's US manufacturing PMI rose to 53.9 from 53.7 in July.

Adding to signs of growth in the US, a report from the Conference Board on Thursday showed that its index of US leading indicators rose 0.6 percent in July.

Sustained positive economic data from the US adds to the likelihood that the Fed will taper its bond purchases. Indeed, on Thursday, Dallas Fed President Richard Fisher told reporters on the sidelines of a manufacturing conference: “Personally I think the economy is strong enough to begin the process.”

Fed tapering looms, emerging markets at risk, US stocks show overvaluation

Global markets fell again on Wednesday as the minutes of the last Federal Reserve monetary policy meeting showed support for the reduction of monetary stimulus.

Bloomberg reports the Fed minutes:

“Almost all committee members agreed that a change in the purchase program was not yet appropriate,” and a few said “it might soon be time to slow somewhat the pace of purchases as outlined in that plan,” according to the record of the Federal Open Market Committee’s July 30-31 gathering released today in Washington.

“A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases,” the minutes show. “Almost all participants confirmed that they were broadly comfortable” with the committee moderating “the pace of its securities purchases later this year.”

While the focus has been on the Fed's monetary policy, emerging markets have also been hit. Unsurprisingly as the Fed's tapering is expected to have an economic impact on countries like Turkey, China and other Asian economies.

The focus on the direction of Fed monetary policy has also resulted in the market looking past still-positive economic data. A report on Wednesday showing that US existing home sales jumped 6.5 percent in July did little to prop up the market.

In any case, markets may have outrun fundamentals. Cullen Roche says that the US stock market is looking overvalued based on comparisons between stock prices and several fundamental indicators, including earnings, asset values, revenues and US GNP.

Stocks fall except in US

Asian stocks tumbled again on Tuesday. The Indonesian stock market was again the big loser, falling 3.2 percent, after having fallen 5.6 percent on Monday. Japanese stocks fell 2.6 percent.

Stocks also fell in Europe on Tuesday. The STOXX Europe 600 lost 0.8 percent.

However, US stocks managed to shrug off the losses elsewhere. The S&P 500 rose 0.4 percent on Tuesday as the 10-year Treasury yield fell 6.4 basis points to 2.82 percent.

Despite the gain in the US, the MSCI All-Country World Index still ended the day down 0.2 percent.

Markets have mostly fallen on anticipation of the Federal Reserve tapering its bond purchases.

However, a report from the Chicago Federal Reserve on Tuesday indicated that US economic growth remained relatively weak at the start of the third quarter.

The Chicago Fed's national activity index edged up to -0.15 in July from -0.23 in June. This pushed the three-month moving average also to -0.15 in July from -0.24 in June.

While the three-month moving average rose for the second consecutive month in July, it remained below zero, suggesting, according to the report, that US economic growth was below its historical trend.

Emerging markets lead global stocks down

Emerging markets have performed poorly recently, and that trend continued on Monday. Bloomberg reports:

The MSCI Emerging Markets Index slid 1.4 percent to 944.88. The Jakarta Composite Index dropped by the most since October 2011, while Thailand’s SET Index retreated to a one-month low. India’s S&P BSE Sensex extended a drop from its July 23 high to almost 10 percent and the rupee led losses in 23 of 24 developing-nation currencies tracked by Bloomberg. Brazil’s swap rates climbed as the real touched a level weaker than 2.4 per dollar for the first time in four years.

Indonesia’s current-account shortfall widened to $9.8 billion last quarter, the largest in data compiled by Bloomberg going back to 1989. Thailand cut its 2013 growth forecast as the country entered recession for the first time since the global financial crisis. India’s rupee plunged on speculation a strengthening U.S. economy may prompt the Federal Reserve to pare its $85 billion monthly bond-buying program.

Developed markets were not spared from Monday's declines. The STOXX Europe 600 fell 0.5 percent and the S&P 500 fell 0.6 percent as US 10-year Treasury yields rose six basis points to 2.88 percent, the highest level since 2011.

Chinese stocks managed to rise on Monday though. The Shanghai Composite Index rose 0.8 percent, its first gain in four days.

Also in China, over the weekend, the National Bureau of Statistics reported that home prices rose in July in 62 of 70 cities it monitors, slightly down from 63 in June.

Japan's trade deficit expands as exports weaken

Japan's trade data on Monday provided further signs that its economy has lost some momentum. Bloomberg reports:

Exports rose 12.2 percent from a year earlier, the Ministry of Finance said in Tokyo today, compared with the 12.8 percent median estimate of 23 economists surveyed by Bloomberg News. Imports climbed 19.6 percent, leaving a trade deficit of 1.024 trillion yen ($10.5 billion). The seasonally adjusted deficit expanded from June to 944.0 billion yen.

Indeed, on a seasonally-adjusted basis, exports fell 1.8 percent in July from the previous month even as imports rose 2.7 percent.

On a seasonally-adjusted basis, Japan's trade balance has been in deficit for 29 consecutive months, with the latest deficit in July being the third largest over that period.

US consumer confidence falls but Treasury yields rise with housing starts

US economic data on Friday were mixed.

The preliminary reading of the Thomson Reuters/University of Michigan consumer sentiment index fell to 80.0 in August from a six-year high of 85.1 in July.

Housing starts rose 5.9 percent to an annual rate of 896,000 units in July. This, however, was below economists' forecasts for a 900,000-unit rate.

Building permits rose 2.7 percent in July to a 943,000-unit pace. This, again, was below economists' expectations for a 945,000-unit pace.

Despite the mixed economic data, investors appear to have raised bets on an imminent tapering of bond purchases by the Federal Reserve.

US Treasuries fell on Friday. The 10-year Treasury yield rose six basis points to 2.83 percent, the highest since July 2011.

Markets fall on positive economic data

US stocks tumbled on Thursday with the S&P 500 falling 1.4 percent.

US Treasuries also fell. Ten-year note yields rose five basis points to 2.77 percent, hitting 2.82 percent at one point on Thursday, the highest since August 2011.

The fall in US markets came as relatively positive economic data on Thursday increased the likelihood of the Federal Reserve tapering its rate of bond purchases soon.

The National Association of Home Builders/Wells Fargo housing market index rose three points to 59 in August. This was its fourth consecutive monthly gain and brings the index to its highest level in nearly eight years.

Initial claims for state unemployment benefits fell 15,000 to 320,000 last week, the lowest level since October 2007.

The consumer price index rose 0.2 percent in July. This brought the 12-month increase in the CPI to 2.0 percent, the largest increase since February, from 1.8 percent in June.

Less positive, however, were data on Thursday on manufacturing.

The Fed reported that manufacturing output fell 0.1 percent last month, leaving industrial output unchanged in July.

The New York Federal Reserve reported that its Empire State general business conditions index fell to 8.24 in August from 9.46 in July.

The Philadelphia Federal Reserve reported that its business activity index fell to 9.3 in August from 19.8 in July.

US markets were not the only ones falling on Thursday. The STOXX Europe 600 fell 1.1 percent, with the UK's FTSE 100 in particular falling 1.6 percent.

Like the US, the fall in UK stocks followed good news on its economy. UK retail sales jumped 1.1 percent in July, pushing the annual rise to 3.0 percent, the highest since January 2011.

Europe exits recession

A report on Wednesday showed that the eurozone economy grew 0.3 percent in the second quarter, bringing its recession to an end.

The eurozone economy had contracted 0.3 percent in the first quarter, its sixth consecutive quarterly contraction.

Germany and France, the euro area’s two largest economies, led the region out of recession, growing by 0.7 percent and 0.5 percent respectively. However, Italy and Spain remained in recession.

Elsewhere in Europe, the UK saw its unemployment rate hold steady at 7.8 percent in June.

Other data though indicated improvement in the labour market.

The number of people claiming jobless benefit fell by 29,200 last month, its ninth consecutive decline and bringing the count to the lowest in more than four years. It follows a drop of 29,400 in June, the largest monthly drop since May 2010.

Average weekly earnings growth accelerated to 2.1 percent in the three months through June compared with a year earlier, the fastest growth since late 2011.

US retail sales and eurozone industrial production rise

Economic data on Tuesday were mostly positive.

US retail sales rose 0.2 percent in July, its fourth consecutive increase. While the rise in total sales was less than the 0.6 percent increase in June, retail sales excluding autos, gasoline and building materials, increased 0.5 percent last month, the most since December.

Other reports from the US on Tuesday showed that import prices rose 0.2 percent in July while business inventories were little changed in June.

In the euro area, a report on Tuesday showed that industrial production rose 0.7 percent in June after having fallen 0.2 percent in May.

In Germany, the ZEW index of investor and analyst expectations rose to 42.0 in August from 36.3 in July.

In the UK, a report on Tuesday showed that consumer price inflation slowed to 2.8 percent in July from 2.9 percent the previous month even as a July survey from the Royal Institution of Chartered Surveyors found the fastest growth in house prices since 2006.

Japanese machinery orders fall

There has been yet another negative economic report for Japan.

The Cabinet Office reported on Tuesday that core machinery orders fell 2.7 percent in June.

The fall in orders, however, was less than that estimated by economists and followed a 10.5 percent jump in May.

Of concern, though, is that companies are forecasting core orders in the July-September quarter to fall 5.3 percent from the previous quarter.

Japan's economic growth slows

The Japanese economy slowed in the second quarter and looks likely to slow further in the third quarter.

The Cabinet Office reported on Monday that Japan's economy grew by 0.6 percent in the second quarter of 2013. It was the third consecutive quarter of growth, although the growth rate was down from 0.9 percent in the first quarter.

Second quarter growth was driven by consumer spending, which grew 0.8 percent, and government spending, which grew 1.0 percent. Net exports contributed 0.2 percentage points to growth, its second consecutive quarter of positive contribution.

The second quarter appears to have ended on a weak note though. A report from the Cabinet Office last week showed that the index of coincident economic indicators fell 0.8 point in June, the first decline in seven months.

And pointing to further weakness ahead, the index of leading economic indicators fell an even larger 3.7 points.

Economic indicators for July released last week also point to weakness at the start of the third quarter.

The Cabinet Office's economy watchers survey showed that the current conditions index of service sector sentiment fell to 52.3 in July from 53.0 in June. The future conditions index was unchanged at 53.6.

The Cabinet Office's consumer confidence index fell to 43.6 in July from 44.3 in June, its second consecutive decline.

Markit's composite output index fell to 50.7 in July from 52.3 in June. The manufacturing purchasing managers index fell to 50.7 from 52.3 while the business activity index for the service sector fell to 50.6 from 52.1.

Chinese industrial production accelerates, Japan's national debt hits one quadrillion yen

Concerns of a slowdown in China eased further on Friday after a report showed that industrial production rose 9.7 percent in July from a year earlier compared with 8.9 percent in June.

Retail sales rose 13.2 percent in July from a year earlier, slightly down from 13.3 percent in June.

Fixed asset investment increased 20.1 percent in the first seven months of the year compared with the same period in 2012, the same as in the first six months.

Inflation also held steady at 2.7 percent in July, unchanged from the previous month.

Meanwhile, China's credit growth appears to be easing. New local-currency bank loans fell to 699.9 billion yuan in July, down from 860.5 billion yuan in June. Total social financing aggregate fell to 808.8 billion yuan in July from 1.04 trillion yuan the month before.

Elsewhere, Japan's economic data continue to come in weak. A report on Friday showed that the consumer confidence index fell to 43.6 in July from 44.3 in June, its second consecutive decline.

Meanwhile, Japan's debt burden has continued to climb. Another report showed that Japan's national debt hit 1.008 quadrillion yen at the end of June.

In the US, a report on Friday showed that wholesale inventories fell 0.2 percent in June. This was weaker than the government had assumed in its advance estimate of second-quarter gross domestic product released last week, suggesting that growth could be revised downward.

BoJ leaves monetary policy unchanged, OECD sees divergence in global growth

The Bank of Japan left monetary policy unchanged after its meeting on Thursday. “Japan's economy is starting to recover moderately,” the BoJ said.

A recovering economy would allow tighter fiscal policy as well, and on cue, the Japanese government announced on Thursday spending cuts of 8.0 trillion yen between April 2014 and March 2016.

Recent economic data for Japan, however, have not been impressive, and that trend continued on Thursday.

While bank lending rose 2.3 percent in July from a year earlier, up from a 2.2 percent increase in June, its current account surplus fell to 336.3 billion yen in June from 540.7 billion yen in May.

Also, a report on Thursday based on the economy watchers survey showed that the current conditions index of service sector sentiment fell to 52.3 in July from 53.0 in June. The future conditions index was unchanged at 53.6.

Trade data elsewhere on Thursday, however, were more positive.

In China, exports rose 5.1 percent in July from a year earlier and imports rose 10.9 percent. Both exports and imports had fallen from a year earlier in June.

In Germany, exports rose 0.6 percent in June. However, imports fell 0.8 percent.

The Organisation for Economic Co-operation and Development released its composite leading indicators for June on Thursday. In its report, the OECD said that the indicators point to diverging growth patterns, with moderate improvements in growth in most major OECD countries but stabilising or slowing momentum in large emerging economies.

Nikkei plunges, German industrial production jumps

Japanese stocks fell sharply on Wednesday. The Nikkei 225 plunged 4.0 percent after the yen touched a six-week high against the US dollar.

Stocks elsewhere also mostly fell on Wednesday, although by smaller amounts. The S&P 500 fell 0.4 percent while the STOXX Europe 600 fell 0.2 percent.

Bank of England Governor Mark Carney’s attempt on Wednesday to restrain expectations of higher interest rates seemed to have had little effect on markets.

“We're not at escape velocity right now,” he said at his first BoE news conference. “This remains the slowest recovery in output on record.”

“The forward guidance contained in the inflation report was broadly expected but what was unexpected were the get-out clauses,” said Lena Komileva at consultancy G+ Economics. “The BoE's pre-commitment to keeping rates at a record low is not as conclusive as it first appeared.”

Indeed, economic data from the UK and the rest of Europe have become more positive recently. On Wednesday, Germany continued that trend by reporting that its industrial production jumped 2.4 percent in June after a 0.8 percent decline in May.

Australia cuts interest rate to record low, European economy shows improvement

The Reserve Bank of Australia cut its official interest rate by 25 basis points to a record low of 2.5 percent on Tuesday. RBA Governor Glenn Stevens cited recent muted inflation and retail sales data for the cut.

Low inflation is also a reason for economists expecting more monetary stimulus from the Bank of Japan.

Data from Japan on Tuesday added weight to the case for more stimulus. The Cabinet Office reported that its index of coincident economic indicators fell 0.8 point in June, the first decline in seven months. The index of leading economic indicators fell an even larger 3.7 points.

However, economic data from Europe on Tuesday were more positive.

In the UK, industrial production rose 1.1 percent in June. Manufacturing output jumped 1.9 percent.

Other data from the UK on Tuesday showed that house prices rose in July at their fastest annual pace in nearly three years, retail sales were 3.9 percent higher than a year earlier and car sales grew 12.7 percent from a year earlier.

In Germany, factory orders rose 3.8 percent in June, the biggest increase since October.

Italy's economy shrank 0.2 percent in the second quarter, better than the 0.6 percent contraction in the first quarter. Italian industrial output rose 0.3 percent in June after having risen 0.1 percent in May.

Meanwhile, in the US, the trade deficit narrowed in June to the smallest in almost four years after exports rose 2.2 percent and imports fell 2.5 percent.

Global services improve in July

A report from the euro area on Monday showed that retail sales fell 0.5 percent in June, the first decline in three months.

Notwithstanding that report, results of global purchasing managers surveys in the services sector released on Monday were mostly quite positive.

In the euro area, Markit's services index for the euro area rose to 49.8 in July from 48.3 in June. This helped push the composite index up to 50.5 from 48.7, the first time it has risen above 50 since January 2012.

In the UK, the Markit/CIPS services PMI jumped to 60.2 in July, its highest level since December 2006, from 56.9 in June.

The Institute for Supply Management’s US non-manufacturing index also jumped to 56.0 in July from 52.2 in June.

In China, the HSBC/Markit services PMI stayed unchanged at 51.3 in July. Over the weekend, the government had reported that its non-manufacturing PMI rose to 54.1 last month from 53.9 in June.

Mixed picture for the major economies

The latest global economic data showed a mixed picture for the world's major economies.

In the United States, economic data last week showed that the economy accelerated in the second quarter and maintained growth at the start of the third quarter.

The US economy grew at an annual rate of 1.7 percent in the second quarter. This was slow growth by historical standards but was nevertheless an improvement over the 1.1 percent growth rate in the first quarter.

Sluggish growth in the US may have continued at the start of the third quarter. Nonfarm payrolls increased by 162,000 in July, the smallest increase in four months.

However, manufacturing data last week showed improvement for the sector. Factory orders rose 1.5 percent in June. The Institute for Supply Management's manufacturing PMI jumped to 55.4 in July from 50.9 in June while Markit's US manufacturing PMI rose to 53.7 from 51.9.

In the euro area, economic data last week indicated that the region's recession may be coming to an end.

Markit's manufacturing PMI for the euro area rose to 50.3 in July from 48.8 in June, indicating that the sector is no longer contracting.

Also, the European Commission's economic sentiment indicator for the euro area rose to 92.5 in July, the highest reading in 15 months, from 91.3 in June.

Meanwhile, concerns over a slowdown in China's economic growth were slightly allayed after the latest economic data.

Purchasing managers surveys on China's manufacturing sector showed a mixed picture. The official PMI from the National Bureau of Statistics and the China Federation of Logistics and Purchasing rose to 50.3 in July from 50.1 in June. However, the HSBC PMI compiled by Markit fell to an 11-month low of 47.7 from 48.2.

Purchasing managers data for the services sector were somewhat more encouraging. The official PMI rose to 54.1 in July from 53.9 in June while the HSBC/Markit PMI was unchanged at 51.3.

However, Japan's economic recovery is looking shaky after last week's data.

The Markit/JMMA Japan manufacturing PMI fell to 50.7 in July from 52.3 in June. Industrial production had fallen 3.3 percent in June.

Japan's unemployment rate did fall to 3.9 percent in June, the lowest in more than four years, from 4.1 percent in May. Still, household spending also fell 0.4 percent in June from a year earlier.

US job growth slows, S&P 500 hits record high

The US employment report on Friday showed that the economy added 162,000 jobs in July.

Last month's increase was less than the 188,000 jobs added in June and the least in four months. It was also less than the 185,000 jobs estimated by economists surveyed by Bloomberg.

Nevertheless, the unemployment rate fell to 7.4 percent from 7.6 percent in June.

Average hourly earnings fell 0.1 percent in July from the prior month and the average workweek for all workers fell to 34.4 hours from 34.5 hours.

Another report on Friday showed that US consumer spending rose 0.5 percent in June while income rose 0.3 percent.

Consumer prices rose 0.4 percent though, so real consumer spending rose just 0.1 percent.

A third report on Friday showed that US factory orders rose 1.5 percent in June, boosted by a 12 percent jump in transportation orders. Excluding transportation, orders fell 0.4 percent.

Durable goods orders rose 3.9 percent while orders for non-defense capital goods excluding aircraft rose 0.9 percent.

Despite the weaker-than-expected employment numbers, investors shrugged off early losses in the market and pushed the S&P 500 up 0.2 percent by the end of the day to another record high.

Stocks rally as ECB and BoE hold and global manufacturing improves

Global stock markets rallied on Thursday. The S&P 500 rose 1.3 percent to a new record high of 1,706.87. The STOXX Europe 600 rose 1.2 percent.

There were no new measures from the European Central Bank's monetary policy meeting on Thursday. ECB President Mario Draghi reiterated that interest rates will stay low for the foreseeable future even as economic indicators signal that the worst is over for the eurozone economy.

Indeed, a report from Markit on Thursday showed that eurozone manufacturing returned to expansion in July. Markit's manuacturing PMI for the region rose to 50.3 last month from 48.8 in June.

There were also no new measures announced by the BoE after its monetary policy meeting on Thursday.

The Markit/CIPS UK manufacturing PMI had risen to 54.6 in July from 52.9 in June.

US manufacturing also improved in July. The Institute for Supply Management’s manufacturing PMI jumped to 55.4 last month from 50.9 in June.

Markit's US manufacturing PMI also improved in July, rising to 53.7 from 51.9 in June.

Dampening the mood somewhat was another report on Thursday showing that US construction spending fell 0.6 percent in June.

Earlier on Thursday, there had been mixed data on China's manufacturing activity. The official PMI published by the National Bureau of Statistics rose to 50.3 in July from 50.1 in June but the HSBC PMI compiled by Markit fell to an 11-month low of 47.7 from 48.2.

Fed sees risk of low inflation as economy accelerates

The Federal Reserve's monetary policy meeting ended on Wednesday with only a slight change to its stance. Reuters reports:

Wrapping up a two-day gathering, the central bank said it would keep buying $85 billion in mortgage and Treasury securities per month in an effort to strengthen an economy that it said was still challenged by federal budget-tightening.

The Fed made three notable adjustments to its post-meeting statement, which economists said gave it a dovish tilt.

First, it slightly downgraded its view of the recovery, calling the pace of growth "modest" rather than "moderate," as it had consistently for most of the past year.

It also noted that mortgage rates had risen, implicitly flagging this as a potential headwind to the housing recovery.

And, importantly, it nodded to the potential dangers of inflation running too low...

Investors noted the dovish tilt and acted accordingly. Treasuries rose, with the 10-year yield falling three basis points to 2.58 percent, and the US dollar fell.

The moves in Treasuries and the US dollar were despite positive US economic data on Wednesday.

The US economy grew at an annual rate of 1.7 percent in the second quarter, accelerating from a 1.1 percent pace in the first quarter.

ADP reported that private employers added 200,000 jobs in July after having added 198,000 in June.

Another report from the US on Wednesday showed that the Institute for Supply Management-Chicago business barometer rose to 52.3 in July from 51.6 in June.

Meanwhile, reports from Europe on Wednesday provided further signs that the economy may be stabilising. Unemployment in the euro area was unchanged at 12.1 percent in June. The inflation rate held steady at 1.6 percent in July.

Japan's economy, though, may have lost some momentum. The Markit/JMMA Japan manufacturing PMI fell to 50.7 in July from 52.3 in June.

European economic confidence rises, US consumer confidence falls

There was good news for Europe on Tuesday.

The report from the European Commission showed that its economic sentiment indicator for the euro area rose to 92.5 in July, the highest reading in 15 months, from 91.3 in June, providing another indication that the region's recession may be coming to an end.

Elsewhere in Europe, GfK's UK consumer confidence index rose to -16 in July, the highest reading since April 2010, from -21 in June.

However, in the US, the Conference Board's consumer confidence index fell to 80.3 in July from 82.1 in June.

Another report on Tuesday showed that the US housing market is maintaining momentum though. The S&P/Case-Shiller index of home prices in 20 cities rose 12.2 percent in May from a year earlier, the biggest 12-month gain since March 2006.

Earlier on Tuesday, data from Japan raised doubts about its recovery. Japanese industrial production fell 3.3 percent in June while household spending fell 0.4 percent in June from a year earlier.

More encouragingly, however, another report showed that Japan's unemployment rate fell to 3.9 percent in June, the lowest in more than four years, from 4.1 percent in May.

Mixed data from UK and US

Economic data on Monday were mixed.

In the UK, the Confederation of British Industry distributive trades survey's sales balance rose to 17 in July from 1 in June.

Data from the Bank of England showed that lending to small and medium-sized firms grew at its fastest pace on record in June. However, overall lending to non-financial businesses shrank by a net 1.3 billion pounds.

Consumer credit rose by a net 489 million pounds in June, the smallest rise since January.

Mortgage approvals fell to 57,667 from 58,071 in May.

In the US pending home sales fell 0.4 percent in June. May sales, though, had been the highest since December 2006.

Chinese industrial profits growth moderates as economy faces risk of sharp slowdown

A report over the weekend showed that Chinese industrial companies’ profits increased 6.3 percent in June from a year earlier. This was well below the 15.5 percent increase in May and added to signs that China's economic growth is slowing.

Bloomberg has a story today looking at the likelihood and implications of a China slowdown to markets.

A copper price collapse of more than 60 percent, zinc cut by up to a half and oil down to $70 a barrel. That’s the fate facing world commodity markets should China’s growth dip to 3 percent in the next three years -- a scenario economists at Barclays Plc (BARC) are now examining.

They’re not the only ones building models based on a steep decline in growth in the world’s second-biggest economy. Nomura Holdings Inc. (8604) estimates a one-in-three chance of a sharp drop by the end of 2014, and Societe Generale SA sees a “non-negligible risk” of less than 6 percent growth this year and an outside chance of 3 percent average expansion for this half and next.

Indeed, Zero Hedge says that there may be “storm ahead” for China.

Demographics, capital accumulation and productivity are the three most important drivers of potential growth, and these three factors are intertwined to a certain extent. China has already entered its first stage of demographic challenge, with its GDP growth slowing on the back of all three contributors of growth...

[G]oing into 2016-20 the second stage of demographic challenge will kick in as we begin to see a decline in China’s working age population resulting in a rise in the age dependency ratio.

Japanese consumer prices rise but stocks fall; markets at risk from Fed exit

A report on Friday showed that Japan's consumer prices excluding fresh food rose 0.4 percent in June, the first increase in 14 months.

Japanese stocks, however, fell on Friday. The Nikkei 225 slid 3.0 percent to a near three-week low as the yen rose.

Stocks elsewhere mostly shrugged off the losses in Japan though. The STOXX Europe 600 fell 0.2 percent while the S&P 500 rose 0.1 percent.

Helping to boost US stocks on Friday was a report showing that the Thomson Reuters/University of Michigan consumer sentiment index rose to 85.1 in July, the highest level in six years, from 84.1 in June.

However, the International Monetary Fund warned in a report on Friday that the Federal Reserve’s exit from its asset purchase programme could trigger “excessive” interest-rate volatility. This in turn could have “adverse global implications”.

The IMF left its US growth forecast for this year unchanged at 1.7 percent.

UK economy accelerates in second quarter

Global economic data on Thursday were quite positive.

In the UK, the economy appears to have gained momentum. GDP grew 0.6 percent in the second quarter after having risen 0.3 percent in the first quarter.

Elsewhere in Europe, there was also good news from Germany. The Ifo institute’s business climate index rose to 106.2 in July from 105.9 in June.

And in the US, durable goods orders rose 4.2 percent in June. Orders for non-defence capital goods excluding aircraft rose 0.7 percent.

Manufacturing shrinks in China but euro area and US report stronger economic data

China's manufacturing sector contracted in July, an HSBC survey showed on Wednesday. Its preliminary reading of the manufacturing PMI for China fell to 47.7 this month, an 11-month low, from 48.2 in June.

In contrast, the eurozone manufacturing sector returned to expansion in July, according to a Markit report on Wednesday. Its preliminary reading of the eurozone manufacturing PMI rose to 50.1 this month from 48.8 in June.

The eurozone services PMI rose to 49.6 in July from 48.3 in June, helping to push the composite index up to 50.4, an 18-month high.

Markit's preliminary US manufacturing PMI also rose in July to 53.2 from 51.9 in June.

In more good news for the US economy, new home sales rose 8.3 percent in June to the highest pace since May 2008.

Japan's economy picking up but trade stays in deficit

The Japanese government has upgraded its assessment of the Japanese economy.

The Cabinet Office's July report on the economy on Tuesday said: “The economy is picking up steadily and shows some movements on the way to recovery.”

However, while a report on Wednesday indeed showed that Japan's exports rose 7.4 percent in June, its fourth consecutive increase, imports rose 11.8 percent, pushing the trade balance into a 180.8 billion yen deficit.

The June deficit extended the country's string of monthly deficits to the longest since a 14-month run that ended in August 1980.

US existing home sales fall

US economic data on Monday were mixed.

Existing home sales fell 1.2 percent in June. With the inventory of unsold homes rising 1.9 percent, the months' supply rose to 5.2.

Nevertheless, the median price for a previously-owned home jumped 13.5 percent from a year ago to $214,200, the highest since June 2008.

The US economy as a whole may have improved. The Chicago Fed National Activity Index rose to -0.13 in June from -0.29 in May. The three-month average rose to -0.26 from -0.37, suggesting that growth remained below historical trend.

Slower foreign buying contributed to rise in Treasury yields

US Treasury yields have risen over the past few months and foreign investors appear to have contributed to the trend. From Bloomberg:

Foreign investors, the bulwark of the U.S. government bond market as it more than doubled in size during the financial crisis, are adding Treasuries at the slowest pace since 2006 amid the worst rout in four years.

Holdings by non-U.S. investors rose 1.9 percent through May, down from 5.2 percent a year ago data last week show, as foreigners owned less than 50 percent of Treasuries outstanding for the first time since March 2012. Overseas central banks cut the amount of bonds held for them by the Federal Reserve during the second quarter. The Bloomberg U.S. Treasury Bond Index fell 2.4 percent, the most since 2009, after Chairman Ben S. Bernanke said he might slow asset purchases as the economy improves...

Central bank sales probably were “far more significant in June,” and helped push two-year note yields to as high as 0.43 percent in June 25 from as low as 0.19 percent in May, Sebastien Galy, a senior foreign-exchange strategist in New York at Societe Generale SA, France’s largest bank, said in a telephone interview on July 16.

The 10-year Treasury yield hit 2.75 percent on 8 July, the highest since August 2011.

Since then, however, Treasuries have recovered some of their losses. The 10-year yield fell 10 basis points last week, touching a low of 2.46 percent on 17 July after Federal Reserve Chairman Ben Bernanke told Congress that the Fed will not slow its bond purchases if the economy does not perform as well as it expects.

US leading index flat, UK retail sales and Chinese home prices rise

US economic data on Thursday were mixed.

The Conference Board's index of US leading indicators was unchanged in June after having risen 0.2 percent in May.

However, the number of claims for unemployment insurance fell by 24,000 to 334,000 last week, the fewest since early May.

Also, the Federal Reserve Bank of Philadelphia’s general economic index increased to 19.8, the highest level since March 2011, from 12.5 the prior month.

Meanwhile, a report on Thursday showed that the UK economy is maintaining momentum.

Retail sales rose 0.2 percent in June. For the second quarter as a whole, retail sales contributed 0.1 percentage points of growth to gross domestic product after rising 0.9 percent from the first quarter.

Also maintaining momentum in June was China's home prices. Reuters reports that new home prices in 70 major Chinese cities rose 0.8 percent in June, slowing just slightly from May's increase of 0.9 percent.

The Chinese government had reported on Thursday that home prices had risen in June in 63 of 70 cities it monitors.

Compared with a year ago, new home prices in China rose 6.8 percent in June, the fastest pace since Reuters began calculating the data in January 2011.

Fed tapering to depend on data, BoE votes against more bond-buying

Federal Reserve Chairman Ben Bernanke reminded everyone on Wednesday that the Fed is by “no means on a preset course” as far as tapering of asset purchases is concerned. From Bloomberg:

“We’re going to be responding to the data,” Bernanke said today to the House Financial Services Committee. “If the data are stronger than we expect, we’ll move more quickly” to reduce purchases. If data “don’t meet the kinds of expectations we have about where the economy’s going, then we would delay that process or potentially increase purchases for a time.”

Indeed, US economic data on Wednesday suggest that tapering in the near future is by no means assured.

Housing starts fell 9.9 percent in June, driven by a 26.2 percent plunge in multi-family homes. Building permits fell 7.5 percent.

However, some economists attributed the decline in housing starts last month to the weather. “It looks like it's weather-related,” said Sam Bullard, a senior economist at Wells Fargo Securities. “On the surface it doesn't look good, but we are confident that starts activity is still going to climb higher in the months to come.”

Also, the Fed's Beige Book published on Wednesday indicated that the economy continued to grow at a modest to moderate pace in June and early July, with residential real estate and construction activity increasing at a moderate to strong pace in all districts.

Meanwhile, expectations for additional monetary stimulus from the Bank of England receded after minutes of the central bank's meeting earlier this month showed on Wednesday that all policy makers voted against more bond-buying.

In addition, a report on Wednesday showed that the number of Britons claiming jobless benefit fell by 21,200 in June, the eighth consecutive decrease and the fastest rate of decline in three years.

Markets fall amid positive US economic data

Markets fell on Tuesday. The S&P 500 fell 0.4 percent, its first decline in nine days. The STOXX Europe 600 fell 0.7 percent.

The fall in stocks came despite positive US economic data on Tuesday.

Industrial production rose 0.3 percent in June, the biggest increase since February.

The National Association of Home Builders/Wells Fargo housing market index rose to 57 in July, the highest level since January 2006, from 51 in June.

Consumer prices jumped 0.5 percent in June, the most in four months, driven by gasoline. The 12-month inflation rate rose to 1.8 percent last month, up from 1.4 percent in the prior month.

The annual inflation rate in the UK also rose in June to 2.9 percent from 2.7 percent in May. However, from the previous month, consumer prices fell 0.2 percent.

US retail sales rise, European bailout fund downgraded

US economic data on Monday were mixed.

Retail sales rose 0.4 percent in June, driven by a 1.8 percent gain at automobile and parts dealers. However, excluding autos and gasoline, retail sales fell 0.1 percent, the first decline in a year.

The Federal Reserve Bank of New York’s general economic index rose to 9.5 in July, the highest since February, from 7.8 in June.

Another report on Monday showed that business inventories rose 0.1 percent in May.

Following the economic reports on Monday, economists now see the US economy growing at 1.1 percent in the second quarter, down from a previous forecast of 1.4 percent.

Despite the mixed economic data, US stocks rose on Monday. The S&P 500 gained 0.1 percent, its eighth consecutive increase, making the current run the longest winning streak since January.

European stocks also gained on Monday, the STOXX Europe 600 rising 0.4 percent.

However, following its downgrade of France's credit rating at the end of last week, Fitch Ratings downgraded the European Financial Stability Facility's credit rating to AA+ from AAA on Monday.

"Following the downgrade of France's IDR (issuer default rating), the EFSF's long-term debt issues are not fully covered by 'AAA' guarantees and over-guarantees and, for debt issued before October 2011, by the cash reserve," Fitch said in a statement.

China's economy slows again

China's economy grew by 7.5 percent in the second quarter, data from the National Bureau of Statistics showed on Monday.

The second quarter growth was slower than the 7.7 percent growth in the first quarter, which was itself a decrease from the 7.9 percent growth in the last quarter of 2012.

However, the second quarter growth figure was in line with estimates from economists.

China's slowing growth trend was reflected in its industrial production for June, which rose 8.9 percent from the previous year compared with 9.3 percent for the first six months of 2013.

However, retail sales rose 13.3 percent year-on-year in June compared with 12.7 percent for the first half as a whole.

Stocks rose in Asia on Monday, with the Shanghai Composite in particular gaining 1.0 percent.

Economic data negative, France downgraded

Economic data on Friday were mostly negative.

In the US, consumer confidence cooled in July. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 83.9 from 84.1 in June.

Another report on Friday showed that US producer prices rose 0.8 percent in June, the biggest increase since September, after having risen 0.5 percent in May.

In China, data from the People's Bank of China on Friday showed that M2 money supply rose 14.0 percent in June from the previous year, down from 15.8 percent the previous month. New local-currency bank loans rose to 860.5 billion yuan last month though from 667.4 billion yuan in May, so non-traditional sources of finance took the brunt of the credit slowdown.

Slowing credit growth could hurt China's economic growth. Economists surveyed by Bloomberg estimated that China's economy grew 7.5 percent in the second quarter from a year ago, down from 7.7 percent growth in the first quarter.

And Finance Minister Lou Jiwei reportedly said in Washington on Thursday that the “expected GDP growth rate this year is seven percent”.

Meanwhile, Asia's other large emerging economy may be hurting even more. A report on Friday showed that India's industrial output shrank by 1.6 percent in May from a year ago. It had grown 1.8 percent in April.

Industrial production also shrank in the euro area in May, falling by 0.3 percent. It had risen by 0.5 percent in April.

Meanwhile, Europe's sovereign debt remains a lingering concern in financial markets. Portuguese 10-year yields rose 61 basis points to 7.51 percent on Friday amid concern a political dispute will result in new elections and endanger the nation’s financial-aid programme.

And the concern continues to spread to the core eurozone countries. Fitch Ratings downgraded France's credit rating to AA+ from AAA on Friday, citing its lack of growth and the build-up of debt.

Markets rise as BoJ leaves monetary policy unchanged

Global stock markets rose on Thursday, buoyed by Federal Reserve Chairman Ben Bernanke's statement on Wednesday that it would keep monetary policy accommodative “for the foreseeable future”.

In the US, the S&P 500 rose 1.4 percent to a new closing high of 1675.02. The 10-year Treasury yield fell 5.5 basis points to 2.57 percent

Elsewhere, the STOXX Europe 600 rose 0.6 percent while in Asia, the Nikkei 225 rose 0.4 percent and the Shanghai Composite jumped 3.2 percent.

Markets, however, received no additional boost from the Bank of Japan, which left monetary policy unchanged following its policy meeting on Thursday.

Elsewhere in Asia, though, monetary conditions appear to have tightened.

China's seven-day repurchase rate jumped 23 basis points on Thursday to 3.83 percent.

Bank Indonesia raised its key interest rate by 50 basis points to 6.50 percent on Thursday, its second consecutive rate hike.

China and Japan report weak data, Fed to maintain stimulus but Brazil tightens policy

A report on Wednesday showing China's trade data for June renewed concerns of an economic slowdown. China's exports fell 3.1 percent in June from the previous year while imports fell 0.7 percent.

Japan also released negative data on Wednesday. Its consumer confidence index fell 1.4 points to 44.3 in June.

Stock markets were mixed on Wednesday.

In Asia, the Nikkei 225 fell 0.4 percent but the Shanghai Composite jumped 2.2 percent.

Western stock markets were little changed on Wednesday. The STOXX Europe 600 rose 0.1 percent while the S&P 500 was flat.

Most investors were focused on the minutes of the Federal Reserve's monetary policy meeting last month as well as Chairman Ben Bernanke's appearance in Cambridge, Massachusetts on Wednesday. “Highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy,” Bernanke reportedly said in response to a question after a speech.

While the Fed looks set to keep rates low for some time to come, Brazil's central bank raised its benchmark Selic rate by 50 basis points to 8.50 percent on Wednesday. It was the second consecutive policy meeting in which rates have been raised.

IMF lowers global growth forecast, S&P cuts Italy's credit rating

The International Monetary Fund has lowered its global growth forecast for 2013. In its latest World Economic Outlook, it says that global growth will be 3.1 percent this year, less than its forecast in April.

It notes that while old risks to global growth prospects remain, new risks have emerged, including the possibility of a longer growth slowdown in emerging market economies.

Indeed, a report in China on Tuesday showed that consumer price inflation accelerated to 2.7 percent in June from 2.1 percent in May. However, producer prices fell 2.7 percent in June from a year ago, its 16th consecutive month of year-on-year decline.

And in a reminder that old risks indeed remain, Standard & Poor's cut Italy's sovereign credit rating on Tuesday to BBB from BBB-plus and left its outlook on negative.

Meanwhile, there were mixed economic reports from the UK on Tuesday.

The National Institute of Economic and Social Research reported that it estimates that the UK economy grew 0.6 percent in the second quarter, double the growth rate in the first quarter.

The report came just after the Office for National Statistics reported that UK manufacturing output shrank 0.8 percent in May. A 4.9 percent jump in oil and gas output, however, left overall industrial production unchanged from the previous month.

Another report on Tuesday showed that the UK goods trade deficit grew to 8.491 billion pounds in May from 8.430 billion pounds in April. Over the three months to May, total exports were up 1.9 percent while imports were up 2.3 percent.

OECD sees better growth in developed economies but slower growth in emerging economies

The OECD reported on Monday that its latest composite leading indicators point to diverging growth patterns in major economies.

The CLI for the OECD area as a whole rose to 100.6 in May from 100.5 in April, with individual country CLIs indicating improvements in growth in most major OECD economies.

However, the OECD said that the CLIs for large emerging economies point to stabilising or slowing momentum.

Meanwhile, there were mixed economic data from Japan on Monday.

Japanese bank lending rose 1.9 percent in June, its biggest annual increase since July 2009. Its current account surplus rose 58.1 percent in May from a year earlier.

However, the Cabinet Office's economy watchers survey showed that the current conditions index fell to 53.0 in June from 55.7 in May. The future conditions index fell to 53.6 from 56.2.

Economic data from Germany on Monday were negative.

German exports fell 2.4 percent in May. With imports rising 1.7 percent, the trade surplus narrowed to 13.1 billion euros from 18.0 billion euros in April.

German industrial production fell 1.0 percent in May. It was the first decline since January and followed a 2.0 percent rise in April.

US Treasury yields rising as Fed tapering expected

The better-than-expected United States employment report for June sent Treasury prices down again last week.

Nonfarm payrolls increased by 195,000 in June, the Labor Department reported on Friday. This was better than the 165,000 increase estimated by economists surveyed by Bloomberg. Revisions added 70,000 jobs to the previous estimates for April and May.

The unemployment rate in June was unchanged from the previous month at 7.6 percent.

The news sent US Treasuries down. The yield on the US 10-year Treasury note rose to 2.74 percent last week, up 25 basis points from the previous week and hitting the highest level since August 2011.

The rising trend in Treasury yields in recent weeks has been driven by expectations of a reduction in debt purchases by the Federal Reserve. Fed Chairman Ben Bernanke had announced last month at a press conference after its monetary policy meeting that if incoming data are “broadly consistent” with its economic forecast, it would moderate the pace of debt purchases later this year.

A poll by Reuters on Friday showed that of 17 dealers who answered a question on the expected timing of the reduction in Fed purchases, 11 called for September, three said October, two said December and one said the first quarter of 2014.

According to Reuters, economists at Goldman Sachs and JP Morgan specifically cited the June employment report as a factor in bringing forward their expected timing of the slowing of Fed purchases.

However, Bill McBride pointed out in a post last week that all of the data released since the Fed's announcement in June of a possible slowing of debt purchases has been worse than its forecasts. He thinks that the economy will have to pick up pace before it can be said to be broadly consistent with those projections and allow the Fed to start to taper its debt purchases.

US employment increases by 195,000 in June

US employment growth maintained its momentum in June. Nonfarm payrolls increased by 195,000 last month, better than the 165,000 projected by economists.

Revisions added 70,000 jobs to the employment figures for April and May. The unemployment rate in June was unchanged from the previous month at 7.6 percent.

Predictably, US Treasuries fell on the news. The 10-year yield rose 22 basis points to 2.72 percent at 4 PM in New York, the highest since August 2011.

Stocks, however, shrugged off the rise in interest rates. The S&P 500 rose 1.0 percent.

Also reporting good news on Friday was Japan. Its index of coincident economic indicators rose 0.8 point in May. And in a sign that growth is likely to be maintained, the index of leading economic indicators jumped 2.8 points.

However, Germany had negative data to report on Friday. Factory orders there fell 1.3 percent in May, its second consecutive decline.

ECB expects rates to stay low for extended period

As expected, the European Central Bank left interest rates unchanged at its monetary policy meeting on Thursday.

Unexpectedly, however, ECB President Mario Draghi told a press conference after the meeting that the central bank “expects the key ECB interest rates to remain at present or lower levels for an extended period of time”.

Markets predictably jumped in reaction to the announcement. The STOXX Europe 600 rose 2.3 percent and the euro declined 0.7 percent against the US dollar.

New Bank of England governor Mark Carney did not go quite as far as his ECB counterpart. After its meeting on Thursday which left monetary policy unchanged, the BoE said in its statement: “The implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.”

Perhaps the BoE's reticence in comparison with the ECB is because recent developments in the UK economy have actually been quite positive.

Following the robust data earlier this week, a report from mortgage lender Halifax on Thursday showed that British house prices rose 0.6 percent in June. Prices were 3.7 percent higher in the April-June period than a year ago, the sharpest annual increase in nearly three years.

US report positive employment data, other data mixed

Economic data on Wednesday were mixed.

In the US, employment data were positive. ADP reported that private sector employment increased by 188,000 in June, up from the 134,000 gain in May while the Labor Department reported that initial claims for state unemployment benefits fell 5,000 to 343,000 last week.

However, other reports on Wednesday showed possible signs of weakness in the US economy. A report from the Commerce Department showed that exports fell 0.3 percent in May, resulting in a wider trade deficit. The Institute for Supply Management's services index fell to 52.2 in June, the lowest level since February 2010, from 53.7 in May.

In China, data showed that services sector activity expanded in June but failed to allay concerns of a slowing economy. The services PMI published by the National Bureau of Statistics fell to a 9-month low of 53.9 in June from 54.3 in May. The Markit/HSBC services PMI edged up to 51.3 in June from 51.2 in May but the new orders index fell to 50.5 in June, the lowest since November 2008.

In the euro area, services sector activity contracted again in June but at a slower rate. Markit's services PMI rose to 48.3 last month from 47.2 in May. That helped push the composite index up to 48.7 from 47.7.

Also encouragingly, retail sales in the euro zone rose 1.0 percent in May, its first increase in four months.

Meanwhile, the UK continued to report robust economic data on Wednesday. The services PMI jumped to 56.9 in June from 54.9 in May. Other data on Wednesday showed that lenders see a further significant rise in mortgage demand in the next three months while a British Retail Consortium survey suggested a major easing in price pressures.

US auto sales, house prices and factory orders rise

US economic data on Tuesday were quite positive. Reuters reports:

Overall auto industry sales in June are on track to increase about 10 percent, and according to GM, will hit their strongest annual sales pace since November 2007...

A report by data analysis firm CoreLogic showed house prices rose 2.6 percent in May from April and were up 12.2 percent compared to May last year, the biggest year-over-year increase since February 2006...

In a separate report, the Commerce Department said new orders for manufactured goods increased 2.1 percent after advancing 1.3 percent in April. Factory orders rose in most categories in May.

US economy shows signs of growth amid mixed data elsewhere

Economic data on Monday were mixed.

In the US, manufacturing activity grew in June. The Institute for Supply Management's manufacturing PMI rose to 50.9 from 49.0 in May.

Markit's US manufacturing PMI also indicated growth in June despite falling to 51.9 from 52.3 in May.

Another report from the US showed that construction spending rose 0.5 percent in May to its highest level in nearly four years.

In the euro area, the unemployment rate rose to a record high of 12.1 percent in May from 12.0 percent in April even as inflation accelerated to 1.6 percent in June from 1.4 percent in May.

However, in a sign that the eurozone recession may be near to an end, Markit's manufacturing PMI for the region rose to 48.8 in June from 48.3 in May.

Meanwhile, the UK economy showed further signs of recovery on Monday. The Markit/CIPS manufacturing PMI rose to 52.5 in June from 51.5 in May. Home loans rose to 58,242 in May, the most since 2009, from 54,354 in April.

Japan's economy is also showing positive momentum. The Bank of Japan's Tankan report on Monday showed that its index of sentiment among large manufacturers rose 12 points to four in the three months to June, the first time in nearly two years that it has been positive.

However, China provided further signs of a slowing economy on Monday. The HSBC manufacturing PMI fell to 48.2 in June from 49.2 in May while the official manufacturing PMI fell to 50.1 from 50.8.

Market rally in first half of year ends on volatile note

After a volatile month, global stock markets stabilised last week.

The MSCI All Country World Index rose 1.3 percent last week, partially recovering the previous week's 3.2 percent loss that had been driven by concerns of a tapering of bond purchases by the Federal Reserve.

For the entire month of June, the MSCI All Country World Index was down 3.1 percent. That cut its gain for the first half of the year to 4.7 percent.

Among the major stock markets, Japan's was the only one to have gained in June. It was also the best-performing stock market among major stock markets for the first half of the year.

MSCI index performance
	Local currency (percent)		US dollars (percent)
	June	1H 2013	June	1H 2013
USA	-1.50	12.50	-1.50	12.50
Japan	0.01	32.59	1.66	15.41
UK	-5.58	5.16	-5.54	-1.88
Germany	-4.50	1.85	-4.21	0.42
France	-5.40	2.68	-5.11	1.23
Hong Kong	-5.73	-2.86	-5.65	-2.93

In line with the rebound in stock markets, government bonds also recovered last week. The US 10-Treasury yield fell four basis points to 2.49 percent last week after having risen 40 basis points the previous week.

In his latest investment outlook published last week, William Gross described the recent market volatility as a case of market panic in response to the Federal Reserve's announcement of a likely tapering of its bond purchases. Investors had taken on too much risk and leverage. As they tried to adjust their positions in response to the Fed's announcement, selling begat more selling, hence the sharp fall in bond prices.

However, Gross advised bond investors not to jump ship now. He thinks that continued low economic growth and inflation will probably prevent the Fed from tapering its bond purchases. He also thinks that the 10-year Treasury should be yielding 2.20 percent, somewhat lower than at present.

In contrast to Gross, John Hussman says in his latest market comment today that a reduction in the pace of the Fed’s bond purchases is likely in the next few months. While he also sees little inflation in the near term, he says that inflation risks will become larger in the back half of this decade. He says that the current pace of purchases increases the risk of systemic disruption and financial distortion as well as the difficulty of eventually normalising monetary policy.

Still, Hussman thinks that Treasury bonds remain worthwhile investments. He thinks that weak economic growth and the lack of immediate inflation pressures will likely dissuade the Fed from selling its bond holdings and also keep short-term rates near zero for a very long time. This in turn is expected to support demand for medium and long-term Treasury debt.

However, Hussman is not as optimistic for stocks and corporate bonds. He thinks that the risk premiums for these assets have already become too thin. He says that stock market internals in particular have broken down “decisively” and that “this may be the highest level investors will see on the S&P 500 for quite some time”.