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The Market Last Week

Global equities ended mostly firmer last week. UK markets ended the week on a negative footing. On the macro front, UK’s gross domestic product (GDP) unexpectedly advanced on a quarterly basis in 3Q17. However, BBA mortgage approvals recorded an unexpected decline in September. European markets ended the week in positive territory, amid weakness in the Euro, after the European Central Bank (ECB) stated that it would reduce its monthly asset purchases to €30.0 billion per month from €60.0 billion. On the data front, Eurozone’s Markit manufacturing PMI unexpectedly soared to its strongest level since February 2011 in October. US markets finished the week on a positive footing, following buoyant corporate earnings. On the macro front, US economy expanded more-than-expected on a quarterly basis in 3Q17. Further, the nation’s Markit manufacturing PMI surged to its highest level in nine months in October. Moreover, the nation’s service sector surprisingly jumped in the same month, its second-fastest rate of expansion since November 2015. Additionally, preliminary US durable goods orders advanced at a faster-than-anticipated pace in September, led by an increase in orders for aircraft and telecommunication equipment. Furthermore, new home sales surprisingly rebounded on a monthly basis in September, notching its strongest level since October 2007. Asian markets closed mostly in the green last week, amid gains in financial and technology sector stocks. Data revealed that Japan’s Nikkei manufacturing PMI registered a decline in October. On the other hand, the coincident and leading economic indices recorded a rise in August.

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Currency Update

The EUR ended lower against the USD last week, after the ECB revealed its plan to reduce its monthly asset purchase programme. In economic news, service activity in the Eurozone dropped more than market forecast in October. Further, Germany’s manufacturing sector eased less-than-expected in the same month. Moreover, the nation’s services activity cooled more than market expectations in October. The British Pound ended weaker against the greenback, as concerns increased over the Brexit process and on uncertainty whether the Bank of England (BoE) would hike interest rates at its next policy meeting. The US Dollar ended firmer against its major peers, after the US House of Representatives narrowly approved a Senate version of the 2018 federal budget, thus clearing the path for Congress to fast-track tax reform legislation. On the macro front, US Michigan consumer confidence index rose in line with market expectations to its highest level since the beginning of 2004 in October. Further, initial jobless claims in the US grew less-than-expected for the week ended 20 October 2017.

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ECB slashed stimulus programme, kept interest rate steady…

At its October monetary policy meeting, the ECB stated that it would reduce its monthly asset purchases to €30.0 billion from €60.0 billion starting from January 2018 and would continue buying at least until September next year, diminishing the prospects of raising interest rates next year. Further, the central bank kept its benchmark interest rate steady at 0.00%. Moreover, the ECB President, Mario Draghi, indicated that growth in the Eurozone has gained momentum this year but cautioned that loose monetary policy would be required for some time, despite the recovery, as the expansion remained conditional on significant support. The central bank also reiterated that interest rates would remain at their current levels well past the end of the asset-purchase programme.

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The Week Ahead

Going ahead this week, investors will keep a tab on the FOMC and BoE’s interest rate decision, US employment report and the ISM manufacturing PMI for further direction. Additionally, Eurozone’s GDP figures and CPI data along with China’s manufacturing and non-manufacturing PMI will be on investors’ radar.

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