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Weekly Market Report

01 Sep 2020

01 September 2020


The Market Last Week

Global equities ended mostly firmer last week, amid hopes over a potential Covid-19 vaccine and expectations of further stimulus from the US Federal Reserve (Fed).

UK Markets ended the week in negative territory, amid strength in the British Pound and mounting concerns over post-pandemic economic recovery.

UK’s CBI distributive trade survey's retail sales balance unexpectedly fell on a monthly basis in August.

Bank of England (BoE) Governor, Andrew Bailey, in his speech at the Jackson Hole central bank symposium, argued that with the £200 billion bond-buying operation which the central bank unleashed in March had shown the value of “going big and fast” with quantitative easing. Further, he suggested that it might be necessary for the central bank to start unwinding its asset purchase programme before it raised rates, to make sure it had enough “headroom” to intervene decisively with a rapid burst of quantitative easing when the next crisis struck.

European Markets markets ended the week on a positive footing, after Germany extended its coronavirus relief package.

Eurozone’s economic sentiment indicator improved in August.

In the Eurozone, the services sentiment indicator rose more than market forecast in August.

Eurozone’s industrial confidence index climbed more than market consensus in August.

In the Eurozone, the final consumer confidence index advanced in August.

Eurozone’s business climate indicator rose less than market anticipations in August.

Germany’s economy contracted less than initially estimated on a quarterly basis in 2Q20.

Germany’s Ifo current assessment index rose more than market consensus in August.

In Germany, business climate index advanced more-than-expected in August.

Germany’s Ifo business expectations index rose less-than-anticipated in August.

In Germany, the GfK consumer confidence index unexpectedly dropped in September.

US Markets ended the week in green, after the Fed announced a new strategy to restore full employment and lift inflation.

US new home sales climbed in July, marking its highest level since December 2006.

The Richmond Fed manufacturing index rebounded in August.

US housing price index advanced on a monthly basis in June.

The Kansas City Fed manufacturing activity index advanced in August.

US pending home sales rose more than market anticipations in July.

The final Michigan consumer sentiment index climbed in August.

In the US, personal income rose more than market consensus in August.

Personal spending rose more-than-expected in August.

US durable goods orders climbed more-than-anticipated in July.

US initial jobless claims dropped less than market forecast on a weekly basis in the week ended 21 August 2020.

The CB consumer confidence index declined for the second consecutive month in August, recording its lowest level since 2014.

The MBA mortgage applications fell on a weekly basis in the week ended 21 August 2020.

US gross domestic product (GDP) plunged on a quarterly basis in 2Q20.

The Chicago Fed Purchasing Managers’ Index (PMI) unexpectedly fell in August.

The Chicago Fed National Activity Index dropped more than market forecast in July.

Asian Markets ended mostly firmer last week, as geopolitical tensions eased between the US and China.

Australia’s private sector credit demand advanced on an annual basis in July.

China’s NBS manufacturing PMI dropped less than market expectations in August.

In China, the non-manufacturing PMI unexpectedly rose in August.

Japan’s corporate service price index advanced on an annual basis in July.

In Japan, the final coincident index rose in June.

Japan’s final leading economic index climbed in June.

In Japan, industrial production advanced more-than-expected on a monthly basis in July.

Japan’s seasonally adjusted retail trade unexpectedly fell in July.


Currency Update

The EUR ended firmer against the USD last week, after Eurozone’s consumer confidence index improved in August.
The British Pound ended stronger against the greenback last week, as investors shrugged off worries over lack of progress in Brexit talks.
The US Dollar ended weaker against its major counterparts last week, after the US GDP plunged in 2Q20, reflecting its biggest quarterly plunge in activity.


Jerome Powell announces new Fed approach to inflation

US Federal Reserve Chairman, Jerome Powell, in his speech, at an annual symposium in Jackson Hole, announced a “robust updating” of Fed policy, which will allow “average inflation targeting”, which means the Fed will allow inflation to run “moderately” above the Fed’s 2.0% goal “for some time”. In addition to the shift on inflation, the Fed also announced a policy tweak that changes the approach to employment. The new language says the approach to the jobs situation will be informed by the Fed’s “assessments of the shortfalls of employment from its maximum level.


The Week Ahead

Going ahead this week, investors will keep a tab on the US Markit manufacturing PMI, the ISM manufacturing PMI, ADP employment change, factory orders, trade balance, initial jobless claims, the Markit services PMI, the ISM services PMI, nonfarm payrolls and unemployment rate for further direction. Additionally, Eurozone’s consumer price index (CPI), unemployment rate, the Markit manufacturing PMI, the producer price index (PPI) and retail sales along with Germany’s CPI, unemployment rate, retail sales, the Markit services PMI and factory orders will keep investors on their toes. Also, UK’s Markit manufacturing PMI, consumer credit and the Markit construction PMI would garner significant amount of investor attention.


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