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The Market Last Week

Global equities ended the week in positive territory, following robust corporate and economic releases. UK markets ended the week on a positive footing, boosted by gains in mining sector stocks. On the data front, UK’s manufacturing production advanced more than market forecast on a monthly basis in August. Furthermore, monthly construction output unexpectedly rebounded in the same month. Meanwhile, industrial production rose in line with expectations on a monthly basis in August. European markets ended stronger for the week, as political concerns in Catalonia eased. In economic news, Eurozone’s Sentix investor confidence index soared to its highest level in 10 years in October. Furthermore, the region’s industrial production surged higher-than-expected on a monthly basis in August, notching its strongest level in 9 months. Adding to the positive sentiment, Germany’s monthly industrial production rebounded to its strongest level since July 2011 in August. Moreover, trade surplus widened more-than-expected in the same month. US markets finished the week in the green, after oscillating between gains and losses. On the data front, US annual consumer price inflation climbed slightly less-than-expected in September. Additionally, the nation’s retail sales painted a positive picture for September, notching its highest level since 2005. Furthermore, the flash Michigan consumer confidence index unexpectedly surged to its highest level since 2004 in October. Moreover, initial jobless claims dropped more than market forecast for the week ended 6 October 2017. Asian markets ended stronger last week, tracking gains on Wall Street. On the macro front, China’s Caixin services PMI recorded a drop in September. Further, the nation’s trade surplus narrowed more-than-expected in the same month.

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Currency Update

The EUR ended in the green against the USD, following upbeat economic releases in the Eurozone and Germany. Meanwhile, the European Central Bank (ECB) President, Mario Draghi, stated that interest rates are likely to remain low and well past the end of its bond-buying programme. The British Pound ended firmer against the greenback, amid reports that the European Union (EU) could offer a two-year transition Brexit deal to the UK. In major news, the UK Prime Minister, Theresa May, warned the Britons to prepare for crashing out of the EU with no deal. The US Dollar ended weaker against its major peers, after the Federal Open Market Committee, in its 19-20 September meeting minutes, revealed that policymakers are leaning towards another interest rate hike in 2017. However, officials debated over whether a streak of soft inflation readings reflects a longer-term trend, rather than temporary weakness.

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Yellen remains optimistic about the US economy, points towards gradual rate hike…

The Federal Reserve (Fed) Chair, Janet Yellen, indicated that the Fed expects the interest rate to increase at a gradual pace following robust growth in the US economy and continued strength in the labor market despite subdued inflation. Moreover, she indicated that inflation has been surprisingly low in 2017 and added that the central bank will pay close attention to the inflation data in the months ahead to stabilise inflation around its 2.0% longer-run objective.

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The Week Ahead

Going ahead this week, investors will await speeches by the ECB President, Mario Draghi and the Fed Chair, Janet Yellen for further direction. The UK CPI, ILO unemployment rate and China’s GDP figures will be on investors’ radar.

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