Friday August 14

Stocks rise on positive economic data. The S&P500 and the Dow Jones both rose 0.4% to 2,091 and 17,477 respectively. A PPI report in the US was strong, beating expectations on both the core and aggregate level. Industrial production also grew las month up 0.6% against the expected 0.4%. These reports both contributed to upward equity movements. WTI oil fell 3.1% on the week, hitting a six year low of $41.35 today before rebounding up 0.6% on the day. The two year yield rose 2 basis points to 0.73%, finishing the week flat. The 10 year yield rose 1 basis point to 2.20%. The 30 year yield fell 2 basis points to 2.86% as the yield curve flattens as tightening expectations draw closer. Yields were flat on the week after China’s devaluation may have set back expectations for tightening. The dollar index was down 1% on the week.

The Greek parliament approves the bailout program. There was tension all night within the parliament discussing the €86bn cash for reforms plan. Matters were further complicated when creditors included additional last minute reforms. There were 222 votes in favor, 64 votes against, and 11 abstentions. 31 out of 149 Syriza members voted against the plan. Including the abstentions Syriza is below a level of 120 votes that is needed to retain a minority government. This makes it more likely that Tsipras will call a snap election. The plan needed to pass in Greece in order for other creditors to agree, as it signals Greece’s administrative willingness to comply. Germany approves of the deal as well. There had been speculation that they would be reluctant to participate without the IMF. Finance ministers in Finland and Germany both believe that there will be a deal by the end of the day. Wolfgang Schäuble and Alex Stubb are usually very strict on Greece. IMF participation is still a talking point, and the fund says it will reconsider its position in the fall. Debt relief remains a likely course of action in the form of maturity extensions as opposed to haircuts.

Despite low oil prices, the weak euro, and very low interest rates due to QE the European economy is still struggling. Regional growth met expectations of 0.4%. Across the region, investment readings were weak particularly in construction spending. GDP in Germany, Italy, and the Netherlands all missed expectations. Unemployment is still above 10% in the region, and there remains a disparity between countries in the north and countries in the south. The ECB continues to buy €60bn government bonds a month in order to lower interest rates and spur inflation. GDP in Greece was surprisingly strong with 0.8% expansion.

Friday August 14

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