A first assessment of what the summer held in store

Macroeconomic environment Germany: pleasant surprise, as there was a stronger than expected improvement in business sentiment, the IFO index recording its strongest 1-month increase since December 2014, from 101.7 in July to 103.7 in August. The expectations component climbed from 98.2 to 101.2. US : unpleasant surprise, as the Chicago Fed National Activity Index declined to 0.13 in July from 0.48 in June (the prior month comparative having come in for a slight upward revision). Equities Equity markets underwent a consolidation on Monday. The S&P 500 was up 0.68% at the end of Eu ropean trading hours, breaking 2 , 896 points for the first time . The rise was fuelled notably by the Federal Reserve’s commitment to a gradual monetary tightening. The Nasdaq Composite put on 0.80%, breaking above 8,000 points. The VIX stabilised at 12 .16 %. The Stoxx 600 closed 0.52% higher, boosted by building materials (+1.28%) and IT (+1.33%). Much the same momentum in Asia ( +1 . 09 % for MSCI Asia Pacific ). Bond markets / Derivatives Bear steepening of EZ curves, against the backdrop of a decline in risk aversion (IFO, NAFTA deal) and in thin trading volumes ( bank holiday in the UK ). Peripheral spreads tightened slightly, save at the short end in Italy (Luigi d i Maio threatening to veto European budget unless there are concessions over immigration). Money markets / Central banks The FRA-OIS spread rebounded by 2bp to 21bp, while there was a steepening of US money market curves (implied probability of hike in Fed Funds rate in December increased to 67%). FX DXY dollar index stable over Monday’s session against the backdrop of breakthroughs in the NAFTA negotiations. The Mexican peso appreciated by almost 1% against the greenback on news of a preliminary agreement with the US concerning mainly the auto sector. The prevailing optimism enabled the Canadian dollar to appreciate by almost 0.5% on hopes the tripartite trade negotiations will resume. The euro extended its rebound, recovering above 1.1650, whereas sterling was stable. The Turkish lira lost almost 2% against the euro and the US dollar on reopening of equity market after a 1-week bank holiday. Commodities Gold rebounded by 0. 2 % to $1,209. 59 /oz on Monday. WTI inched up to $68. 82 /bbl.