The finance ministers and central bankers from the seven largest advanced economies (G7) met in Japan over the weekend discussing a wide range of global issues that included, the Brexit, crude oil prices, financial regulation, cybersecurity, monetary policy, tax evasion and global growth.
The meeting adjourned with the participants all calling for more efforts towards growth. There was an agreement that a mix of fiscal, monetary, and structural policies would be needed. However, it was decided that each country would enact plans to boost demand following their own priorities.
The United States has warned Japan again, not to intervene in the currency markets in an effort to help boost the Japanese domestic economy.
This occurred in the face of Japanese manufacturing activity contracting at the fastest pace in more than three years in May. Factory orders are falling dramatically, putting pressure on the government to increase the level of stimulus.
Japanese Prime Minister Abe and Chinese President Xi Jinping
In related news, the Japanese Prime Minister may delay a sales tax increase for another three years, due to the depressing effect such an addition would have on the economy of Japan.
The American President Barack Obama declared an end to the United States arms embargo, that had been on Vietnam during a three day visit there. It has been in place for decades. There was also renewed discussion with the ongoing Trans-Pacific Partnership. China will not appreciate these new developments.
China’s central bank lowered the yuan reference rate this week by 0.3% to 6.5693 per USD (United States Dollar). It is now at the lowest level against the American dollar since early 2011. This action will increase tensions between the trading partners of China.
Markets in Asia were down at the beginning of the week, as well as in Europe and generally flat in the United States.
United States Secretary of the Treasury Jack Lew and Federal Reserve Chair Janet Yellen.
As the week progressed, global markets would then ratchet up as investors assessed various economic indicators. The big mover in equities was the increasing indications that the United States Federal Reserve Bank (Fed) will raise interest rates already this summer.
Global stocks have rebounded from a 6 week low as of last week.
As the equivalent of the central bank in the United States, if the Fed does raises interest rates, the effect will not only hit the American economy, but the world economy as well.
Both United States Treasury yields and the USD are moving up, in anticipation of a hike in the interest rate. As the leading reserve world currency, an increase in rates will create a ripple effect on the global economy.
Although business growth in the Euro-zone held steady this month, the acceleration in growth from the first quarter seems to have abated.
Elected in 2016, Alexander Van der Bellen the new President of Austria.
Austria presidential election was a squeaker, with the independent winning by just 31,000 votes, over the far right candidate out of 4.64 million ballots cast. Former Green politician Alexander Van der Bellen is the new president. Yet Norbert Hofer from the Freedom Party, will continue to promote now popular issues of further controls on migration to the country and a halt to further integration with the European Union.
Chancellor Merkel from Germany met with Turkish President Erdogan to reinvigorate a deal to limit the number of refugees coming to Europe. The overall agreement promises financial aid, visa free travel and promise of progress towards European Union membership for Turkey.
President Erdogan would later threaten to scrap the entire deal because he claims the European Union is not keeping its word on the promised financial aid and the visa free travel to Europe, that was promised to Turkish citizens.
The parliament in Greece approves new taxes and spending cuts in an effort to pass an austerity package, that will unlock additional rescue loans for the debt troubled economy. As of yet, Germany and the IMF (International Monetary Fund) remained deadlocked over further debt relief for Greece.
The British Treasury warns the Brexit would cost retirees the equivalent of $440 billion USD. This would be the result of higher inflation, job losses and reduced valuations in home ownership.
The Treasury building viewed from St. James’ Park in London
The American New York Stock Exchange will register a sizable increase this week, after declines in the four preceding weeks. The watch for 18,000 has started again, but remains flat at about 17,850 on Friday morning.
Crude prices reached a 7 month high, breaching $50.00 USD, before falling back again.
Oil exports from Iran are surging higher this month. They are over 60% larger than a year ago. Shipments to Europe are already 50% of what they were before sanctions. Iran is regaining market share faster than expected, by lowering crude prices in a combative contest with Saudi Arabia in the quest for new customers.
A stronger American dollar and the rising global supply, with the near end of the Canadian outage, is putting a downward pressure on world crude prices. Iran is now touting a total of 2.2 million barrels a day by midsummer. They are also refusing to be part of any output freeze.
On Friday morning, American West Texas Intermediate (WTI) oil decreased -0.69% to $49.14 USD, but prices are still $1.00 USD above where they stood last week. International priced Brent is down by -1.07% at $49.06 USD. This is about $0.50 USD increase in valuation from the week before.
In corporate news the giant drug and chemical company Bayer based in Germany, has been rebuffed in the offer to buy Monsanto. The $122 a share priced at total of $62 billion USD offered, is deemed insufficient by the agribusiness giant. The company shares were selling at $109.50 Friday morning.
The strongest EL Nino in nearly 20 years is supposedly ending. This will lead to a cooling of temperatures in the Pacific Ocean. There has been heavy crop damage in Africa and Asia due to severe weather, as well as massive flooding in South America.
The Investment Newsletter had 0 target fills to report this week, and 2 early stock targets.
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