Money Round Up – Good news for the US, China, and Europe

Welcome to this week’s economic update. We’re over half way through the year now, and as we reach the height of summer, companies commenced releasing their latest set of financial accounts. Investors eagerly anticipated these quarterly results for insights into levels of corporate well-being.

What we know at this point is that one hundred and seventy two out of the five hundred US companies in the S&P five hundred index have reported results so far. Technology, Financials, Health Care and Industrials are all doing particularly well. We also know that expectations for a good outcome have grown. For this current quarter the estimate for earnings growth is a whopping twenty percent.

Profit levels this time follow on from impressive first quarter results, when earnings growth soared by twenty five percent, surpassing the seventeen point one expectation set by analysts.

Earnings growth this year is being supported by loose monetary conditions and new fiscal policies such as tax cuts which have energised the US economy.

If we go a little deeper there are some standout performers. As in the previous quarter, Goldman Sachs released impressive results. Profits surged forty percent to two point five seven billion dollars in quarter two, exceeding analysts’ estimates.

Other noticeable strong performers included Alphabet, commonly known as Google, which logged a twenty six percent gain in second quarter revenues.

Harley Davidson, a firm caught up in the trade turmoil, topped Wall Street’s quarterly earnings estimates and their share’s rallied nine percent after the company results. This has given hope that future profits will hold up better than expected despite the tariff obstacles.

On top of all of this, Donald Trump gave a press conference on Friday to make as big of a deal as possible that the US economy grew at its fastest pace in nearly four years in the second quarter, expanding at an annualised rate of four point one percent.

Also last week, Trump met with European Commission chief Jean-Claude Juncker at the White House, with both leaders agreeing to avoid an all-out trade war and work to lower tariffs. While turmoil surrounds Trump on other fronts, he will be buoyed by these recent developments.

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In China, whilst above target GDP, the Chinese government have felt the need to act by pulling various fiscal and monetary levers to support future economic growth.

As well as requesting a change in the behaviour of local government to a pro-growth style, financial institutions are starting to be asked once again to make liquidity more accessible; including through shadow banking channels which hitherto have been clamped down on.

Debt driven growth has been in the veins of Chinese business and government since 2008 and it seems the pressures from the US may have the effect of putting President Xi Jinping’s deleveraging plans on ice.

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In Europe, Economic data across the European economy has remained resilient. European PMI figures remain well above 50, indicating that the Eurozone economy is still expanding. Furthermore, the Manufacturing PMI figures increased to fifty five point one, with manufactures shrugging off mounting threats of trade wars between the Eurozone and the US.

The President of the European Central Bank, Mario Draghi, gave a more upbeat assessment of the Eurozone recovery noting that the “euro area economy is proceeding along a solid and broad-based growth path” despite the uncertainties which surround “the global trade environment”.

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Overall, it has been a positive week when reflecting on the three major economies of the US, China and Europe. Upcoming events next week include the Bank of England Inflation report and US employment report, so subscribe to the true potential investor youtube channel and join us again next week for the latest money round up