It appears markets have run out of oomph. We have gone back to typical summer markets, where there is a drifting of trends but not a lot to get your teeth into. Equities were generally up to flat; but China was lower. Yields drifted a little lower, as did commodities. The USD was higher, but off its peaks around the data. In general, emerging market currencies underperformed.

We had a smidgen of ok US data, China equities were lower again, but not drastically so, and there are news reports of things not being entirely right with the Greek rescue. But the pull of the Northern Summer beach appears to be over-riding, and we are likely to see more of the same in the next 24 hours. Happy Friday and long weekend for the financial sector, locally.

The US reported its Q2 GDP outcome, and it was better than the Q1, but not as much as expected. Q2 GDP was 2.3% saar, with expectations at 2.5%, but the Q1 result was revised up to +0.6%saar from the initial -0.2%. The core PCE was up more than expected at 1.8%qA, 1.6E and the prior revised up. Overall, ok but not stellar. That pretty much sums up the day.

The FT is running a story that is getting plenty of airtime, but we’d already heard the news from Germany’s Schaeuble before. The IMF will not be involved in the Greek bailout (ie provide funds) unless there is more explicit agreement on conditions and debt relief. Remember the EU won’t discuss debt relief for some time yet. And it may be difficult for Germany to get approval without IMF involvement. We are likely to hear more before the money is paid and things are settled. On the positive side, Europe’s economic confidence indicator rose, unexpectedly, to a new cycle high. So it seems not everything is too bad.

Coming Up

Attention moves away from the US for the first time this week, with a re-focussing on Japan and then China.

Domestically there is private sector credit for June; which doesn’t often worry markets too much.

But Japan releases its CPI. The BoJ is having a little trouble with that inflation data, in that it isn’t doing what they would like. It is stubbornly staying low; and today’s National CPI (yoy) is expected to drop to 0.3%yoy from 0.5%; ex fresh food and energy (core) is expected to be steady at 0.4%yoy. The BoJ would like to show that their stimulus program is working and that inflation is normalising to their preferred target- of 2%. But it isn’t (as yet). What to do: change the target? No so fast, it took a long time to get the target. There is a proposal that the BoJ change the inflation measure used for the target inflation rate of 2%.

The core measure, without food and energy has been promoted, and one BoJ board member yesterday was focussed on ex energy (of which the rate is higher).

This makes it a little more difficult for markets to interpret the BoJ’s path, but it does suggest that the core measures are likely to become more attention grabbing. Today’s outcome is unlikely to be anywhere close to what the BoJ are looking for.

Inflation levels have been relatively low in general globally. Yes, part of that in the last while has been the decline in oil prices. But, inflation has been relatively subdued in the post financial crisis environment. The EU also releases its flash CPI today, with the headline result expected at a paltry 0.2%yoy, and the core steady at +0.8%yoy. And that is why the ECB are looking to continue with their asset purchasing program for some time yet.

On Saturday, China, as always on the first of the month, will be releasing their official PMI. This has been remarkably more stable than the unofficial one, but it will come as a surprise if it is weaker than expected.

The US releases the Chicago PMI, which should improve a little in July, but next week’s ISM is likely to be more instructive.

Overnight

On global stock markets, the S&P 500 was flat. Bond markets saw US 10-years -2.34bp to 2.26%. On commodity markets, Brent crude oil -0.11% to $53.32, gold-0.5% to $1,087, iron ore -0.5% to $55.64. AUD is at 0.7292 and the range was 0.7255 to 0.7323.

• US GDP 2.3%saarA, 2.5E, +0.6P rev from -0.2
• EU Economic confidence 104A, 103.2E, 103.5P
• German flash CPI 0.2%A, E, -0.1P

For full analysis, download report:

• Markets Today : 31 July 2015 (PDF, 331KB)

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