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The US indices mostly rose yesterday. The Federal Reserve stress test showed that the 23 largest US banks could withstand a severe recession scenario. At yesterday's stock market close, the Dow Jones Index (US30) increased by 0.80%, and the S&P 500 (US500) added 0.45%. The Nasdaq Technology Index (US100) closed yesterday at an opening level.

Wells Fargo & Company (WFC), JPMorgan Chase & Co (JPM), and Goldman Sachs Group Inc (GS) led the rally in the banking sector amid growing optimism after passing the stress tests. But analysts don't share that optimism, as there are big doubts that the nation's regional banks will be able to withstand the recession.

Atlanta Fed President Rafael Bostic continued to signal yesterday that the Fed should take a pause, saying it would be wise to keep rates at current levels in future meetings, as inflation is likely to slow without additional tightening.

Nike (NKE) posted mixed results for the fourth quarter as earnings came in below Wall Street estimates, but revenue exceeded forecasts on the back of the ongoing recovery in China. Sales in North America rose by 5% year-over-year in the fourth quarter, while sales in China, an important market for the sportswear giant, jumped by 16%.

The US Gross Domestic Product (GDP) for the second quarter was 2%, exceeding economists' forecasts of 1.4%. Because of the Fed's hawkish stance and strong economic data, the inversion of the US yield curve is deepening. This is a sign that investors are increasingly worried about slowing economic growth. An inverted yield curve occurs when short-term Treasury bond yields exceed long-term yields, reflecting bets that the Central Bank will have to cut rates in the future to support an economy hit by higher borrowing costs.

Equity markets in Europe traded flat yesterday. German DAX (DE30) closed at the opening level, French CAC 40 (FR40) gained 0.36%, Spanish IBEX 35 (ES35) added 0.36%, and British FTSE 100 (UK100) was negative by 0.38%.

Inflationary pressure is growing again in Germany. The consumer price level in the country rose from 6.1% to 6.4% in annual terms. Eurozone's inflation data will be released today. General inflation is expected to fall from 6.1% to 5.6% y/y, but core inflation is expected to rise from 5.3% to 5.5% y/y. This will be a hawkish signal for the ECB.

Asian markets were mostly down yesterday. Japan's Nikkei 225 (JP225) gained 0.12% yesterday, China's FTSE China A50 (CHA50) lost 0.94%, Hong Kong's Hang Seng (HK50) ended the day down by 0.80%, and Australia's S&P/ASX 200 (AU200) ended Thursday negative by 0.02%.

Bank of Japan Deputy Governor Ryozo Himino said the country's banking sector remains resilient and has enough reserves to withstand any stress caused by future interest rate hikes. The least favorable condition for domestic financial institutions would be for Japan to keep interest rates ultra-low for too long amid a weak economy, Himino said. Analysts believe the Bank of Japan has been slow to prepare for monetary policy normalization.

Tokyo's core consumer price index rose to 3.2% from 3.1% (forecast 3.4%). This Index is seen as a leading indicator of inflation across the country. Despite the fact that the inflation value was below the forecast, consumer prices are showing steady growth, which is exactly what the Bank of Japan wants to see before it changes its monetary policy.

China's manufacturing activity declined for the third month in a row in June, while weakness in other sectors intensified. The official manufacturing purchasing managers' index (PMI) rose to 49.0 from 48.8 in May, remaining below the 50-point mark that separates growth from contraction. The non-manufacturing PMI fell to 53.2 from 54.50 in May, indicating slowing activity in the services and construction sectors. New orders and new export orders declined for the third straight month, with export orders declining at a faster pace. This situation adds to the pressure on the authorities to do more to support growth as demand falls both at home and abroad.

• S&P 500 (F) (US500) 4,396.44 +19.58 (+0.45%)
• Dow Jones (US30)34,122.42 +269.76 (+0.80%)
• DAX (DE40) 15,949.00 −2.28 (−0.014%)
• FTSE 100 (UK100) 7,471.69 −28.80 (−0.38%)
• USD Index 103.35 +0.45 (+0.43%)
   

Important events for today:

• Japan Tokyo Core CPI (m/m) at 02:30 (GMT+3);
• Japan Unemployment Rate (m/m) at 02:30 (GMT+3);
• Japan Industrial Production (m/m) at 02:50 (GMT+3);
• China Manufacturing PMI (m/m) at 04:30 (GMT+3);
• China Non-Manufacturing PMI (m/m) at 04:30 (GMT+3);
• UK GDP (q/q) at 09:00 (GMT+3);
• German Retail Sales (m/m) at 09:00 (GMT+3);
• Switzerland Retail Sales (m/m) at 09:30 (GMT+3);
• German Unemployment Rate (m/m) at 10:55 (GMT+3);
• Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• Eurozone Unemployment Rate (m/m) at 12:00 (GMT+3);
• US PCE Price index (m/m) at 15:30 (GMT+3);
• Canada GDP (q/q) at 15:30 (GMT+3);
• US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3);
• Canada BoC Business Outlook Survey at 17:30 (GMT+3).

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