Last week US stocks reached record levels after receiving support from Jerome Powell, who vowed to support the economy in testimonies to congress. This was interpreted to mean that the central bank would slash interest rates in the upcoming meeting. This will be a good thing for the market because it will help reduce the amount of money that companies pay in interest. On Friday, the Bureau of Labor Statistics released the producer price index data, which measures the change in the price of goods sold by manufacturers. The data showed that the PPI increased by an annualized rate of 1.7% in June. This was a better growth rate than the 1.6% that traders were expecting. On a MoM basis, the PPI remained unchanged at 0.1%. The core PPI increased by an annualized rate of 2.3% and a monthly rate of 0.3%.
In Hong Kong, the embattled chief executive, Carrie Lam offered to resign. This is after the Chinese territory has seen increased protests on a controversial bill that she has backed. The bill would have created a mechanism to extradite anyone in Hong Kong to China. This was viewed with criticism because China is not known for its effective justice system. According to the Financial Times, Lam offered to resign a number of times as the protests increased. These resignation requests were rejected by Beijing, which has said that she has to remain in power to ‘clean up the mess she has created.’ While she has suspended the proposed extradition bill, protesters want her to withdraw it completely.
Over the weekend, talks went on between Iran and the United Kingdom. The tensions between the two countries started when the UK took possession of an oil tanker that it said was taking crude oil to Syria. In response, Iranian boats tried to capture a British oil tanker that owned by British Petroleum (BP). It took the work of a British warship to stop the attack, that was intended to take possession of the ship. Over the weekend, high level talks between ministers of the two countries took place.
Turkey was in the headlines over the weekend as the country started to receive controversial military equipment from Russia. The country committed to buy the Russian S-400 surface to air missile, a move that has been criticized by the US and other NATO members. This is because the new system would compromise the security of other NATO Members. It would also compromise the security of Lockheed Martin’s F-35 next generation fighter jet by collecting sensitive data on the aircraft. The US is expected to issue sanctions. Over the weekend, Turkey’s Erdogan said that he hopes the Trump administration will find compromise on the issue. The Pentagon has also said that it will sideline Turkey from the F-35 programme.