The document provides an overview of global economic and financial market developments in July 2015. It discusses central bank actions and macroeconomic data releases across various countries and regions. Mixed economic indicators and ongoing issues like the Greek debt crisis contributed to volatility in markets as stocks, bonds, and commodities fluctuated during the month.

1. LOOKING BACH ON JULY 2015
The Greek crisis is taking a well-deserved summer break, but all agree that the
issue is far from being resolved. Most notable, there is now bickering in the
creditor camp, with unexpected calls from the IMF to reduce the debt, calls
naturally opposed by Merkel. The Chinese stock market is picking up the baton,
losing 15% in a month despite many stocks halted; the Central government is all
but at a loss. Has this slow Chinese train crash been weighing on commodities?
Activity also picked up among central banks. The Fed engaged in its favourite
exercise of linguistic tinkering, which resulted in much debate about the
possibility of a September hike. Interest-rate futures still do not favour this
outcome, however, preferring to wait for clearer signals in the macro releases.
This is an indication that the Fed’s intents are more strategic than economic,
that they want to create a rate buffer ahead of the next downturn. The ECB
affirmed its support of Greece staying in the zone, providing credit for its banks.
The Bank of England acknowledged the Greek risk but also signalled possible
tightening towards year-end. The Bank of Canada unsurprisingly cut its central
rate by 0.25%, to 0.5% as weak numbers keep coming in; the Reserve Bank of
New Zealand did the same, cutting by 25bps to 3%, citing low inflation and
growth.
It remains difficult to reconcile the Fed’s view of the economyand the reality of
the numbers, which are still coming short of expectations on average. Indeed,
non-farm payrolls came in weaker than expected, albeit at 223k, with the past
month revised down 26k; the unemployment rate did drop a notch to 5.3%,
however, prompting more analysis of the participation rate and summer
seasonalities. The useful ISM numbers were mixed, manufacturing stronger than
expected, and services weaker. They still point to an economynot growing faster
than 2.5% annually, which was confirmed by the much-awaited GDP release.
This showed Q1 growth revised to 0.6% (from -0.2%) and Q2 at 2.3%. Durable
goods also painted a mixed picture, with the headline number quite good, but
the core print disappointing. Housing yields conflicting signals too, with strong
starts and existing home sales balanced by weak new home sales and Case
Shiller index. Inflation is the only constant, with the CPI ticking one small notch
upward at +0.1% Yoy (core +1.8%).
UK macro-economic numbers were also mixed. The all-important services PMI
did strengthen noticeably, to 58.5, and so did the construction PMI, but
manufacturing missed expectations and dropped on the month, to 51.4.
Industrial production nevertheless increased month-on-month, but retail sales
were disappointing, at an annual rate of 4%, versus 4.6% reported in June, and
unemployment moved up a tenth, to 5.6%. In this context, the GDP numbers
were as expected, +0.7% on the month, +2.6% on the year. Again, the

2. economy is doing fine but not accelerating at all; inflation is nil, with the core
down a notch to just +0.8% YoY.
The euro advanced PMI numbers were disappointing, with misses for the zone
and Germany, and a big drop in France, though Spain is going from strength to
strength. Many measures of confidence are also printing lower as the Greek
gloom disseminates, and hard numbers such as sales hold up, but just. Inflation
is 0.2% for the zone, with core estimated 0.2% higher than last month at 1%.
The first week in July saw yields rally before snapping back up, and then edging
lower again. The US 10-year finally shed 17bp to 2.18% but the 2-year was 4bp
2 higher at 0.66%. The UK market was similar, the 10-year falling 14bps to
1.88% while the 2-year added just the one bp at 0.57%. The German 10-year
yield dropped 12bps to 0.64% while the 2-year gave up one bp at -23bps. The
periphery outperformed, France’s 10-year yield down 26bps at 0.94%, Italy
56bps lower at 1.77%, and Spain shedding 46bps at 1.84%
July also shone favourably on risk assets; US stocks added another 2%, for a
2.2% gain since the beginning of the year. The UK market was a little better at
+2.7% (but only +2% YTD) while the euro zone jumped 4.8% for a 15.5% gain
for 2015. The exception to this was found in emerging markets stocks, which
shed over 7% and are down almost 6% for the year. US IG credit spreads were
unchanged at 70 while European credit was close to 13 points tighter, at 62.
The levelling off in energy prices turned into a rout as WTI dropped close to 21%
to reach $47.1/bbl (Brent: -18%; gas: -4%). Gold also suffered, shedding over
6% to $1,096/oz, while silver gave up over 6% and copper, one of the worst
commodity in 2015 (-14%), 10%. The other big mover was again wheat (-19%),
closely followed by corn (-10%). In currencies, the surprise move in central bank
rates hit the Canadian dollar hard (-4.6%) while the greenback once again led
the pack (+1.9%). Both the Norwegian and Swedish crowns lost 4%, but the
drop was even bigger for the Brazilian real (-9%) and the rouble (-10%).