The post Brexit market rally continued this last week even in the face of a failed Turkish coup that has now resulted in a state of emergency.
US Data
Data in the US was light this last week, with the focus remaining on the 2nd quarter earnings. While still negative the earnings season has performed better than expected. This has allowed the post Brexit rally to continue for the 4th straight week. Manufacturing PMI improved more than expected to 52.9[1]. Improving data in the US may lead to more hawkish sentiment from the Federal Reserve this coming week.
US Real Estate
There was a swath of housing data last week, all of which were positive. Building permits rose by 1.5%. Housing starts increased dramatically in June, advancing 4.8% or 1.189M[2]! Existing home sales advanced when they were expected to decline. This being the most substantial indicator of the group makes the course reversal very meaningful. The anticipated strength of the spring real estate market has finally begun to take hold.
International Data
Turkey experienced a failed coup that has kept its financial markets at bay ever since. Driving it further down has been the reaction from the government calling for a state of emergency. This situation allows leadership to suspend the democratic process for the next 90 days to get things under control. The fear, as always, is over reaching the bounds of intended measures.
PMI fell dramatically in the United Kingdom after the Brexit. Most of the month was pre-Brexit, so much of the fall may have been in anticipation of the vote as opposed to an actual impact of the Brexit.
The newly appointed UK prime minister made her way to Europe and has been told that free travel is going to be a requisite of getting access to the European market.
Conclusion
Given the recent movement in the dollar, the current strength in the markets is likely to be short lived. Not to say that it will result in a down turn, but rather that the improvements this earnings season may be short-term and result in more market volatility through the end of year.
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[1] www.investing.com – economic calendar
[2] www.investing.com – economic calendar