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The Market Last Week

In an important development over the weekend, North Korea has claimed that it tested a hydrogen bomb. Global equity markets ended the week in positive territory, amid upbeat economic releases across the major economies of the world. UK markets closed in the green for the week, boosted by sharp gains in mining sector stocks. On the data front, UK’s Markit manufacturing PMI surprisingly advanced to its highest level in 4 months in August. Furthermore, GfK consumer confidence recorded an unexpected rise in the same month. European markets closed mixed last week. On the macro front, Eurozone’s consumer price index (CPI) recorded a more-than-anticipated rise on an annual basis in August, marking its strongest level in 4 months, providing renewed signals that the European Central Bank (ECB) could tighten its monetary policy. Additionally, final consumer confidence index advanced in line with market expectations in August. Moreover, economic confidence index unexpectedly rose in the same month, notching its highest level since July 2007 while the business climate indicator grew more than market forecast in August. Meanwhile, Germany’s annual flash CPI recorded a rise at par with market estimations to its highest level in 4 months in August. US markets rose last week, amid gains in biotechnology sector stocks. In economic news, US economy expanded at a faster pace to its highest level in more than 2 years in 2Q17, driven by an increase in consumer spending and business investment. Asian markets closed mostly in the green during the week. On the macro economic front, China’s Caixin manufacturing PMI unexpectedly rose in August, notching its strongest level in 6 months. Meanwhile, non-manufacturing PMI registered a decline in August, reaching its lowest level since May 2016.

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Currency Update

The Euro ended weaker against the greenback, after data showed that Germany’s retail sales painted a negative picture for July. Moreover, Markit manufacturing PMI unexpectedly dropped in August. The GBP ended stronger against the USD, following upbeat economic manufacturing data in the UK. The US Dollar ended mixed against its major peers, after the US Treasury Secretary, Steven Mnuchin, stated that weakness in the US Dollar is better for the US economy as far trade is concerned.

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Weaker US employment report casts doubt on interest rate hike this year…

A dismal August job growth report mulled expectations of another rate hike by the US Federal Reserve (Fed) by the end of this year. The US Department of Labor indicated that US non-farm payrolls advanced less than market expectations in August while unemployment rate surprisingly ticked up in the same month. The US witnessed a mixed set of economic data this week as final Michigan consumer confidence index declined more than market expectations and from its preliminary reading in August but came higher than the previous reading of July. Additionally, pending home sales painted a negative picture for July, its fourth decrease in five months. Initial jobless claims rose less-than-expected for the week ended 25 August 2017. In contrast, US GDP rose at a stronger-than-expected pace in 2Q17, notching its strongest level in more than 2 years. Moreover, ISM manufacturing PMI advanced more-than-expected in August while final Markit manufacturing PMI recorded an unexpected rise in the same month.

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The Week Ahead

Going ahead this week, investors will keep an eye on the ECB’s interest rate decisions and the US Fed’s beige book along with US ISM non-manufacturing PMI, UK’s NIESR GDP data and Markit services PMI data across the world for further cues.

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