Daily Market Commentary 2nd August 2022

A strong close to July equity markets, was brought about by renewed confidence in the market, despite all of the data. Equities rallied strongly to close out July, while US Bond Yields continued to decline, reflecting the US recession. The Share market rally is based on the recession and that this will force the Fed away from the ‘War on Inflation’ and halt the rate rises. The heart of the problem is the Fed’s balance sheet, supporting runaway deficit spending and debt, which needs to be severely cut for any success against inflation. European PMI data fell below 50, which confirms a contraction in Manufacturing, hinting that the latest economic growth numbers are very transitional. The ECB has failed to address inflation, allowing growth to remain positive, but that party is over. The energy crises is smashing manufacturers and the consumers. The falling US bond yields has allowed the US Dollar to slide, with the EUR trading 1.0250, while the Yen has surged to 131.60.

Australian Manufacturing PMI was steady, while Job Ads fell, but the softer reserve allowed the AUD to regain 0.7000. The NZD also managed to gain some ground, breaking above 0.6300, despite a contraction in Building permits reflecting a weakness in this leading sector. Local markets will focus on the RBA, which is expected to raise rates further, while the narrative will be closely watched.