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Weekly Market Report

21 Sep 2020

21 September 2020


The Market Last Week

Global equities ended lower last week, after the the Organisation for Economic Cooperation and Development (OECD) warned that the recovery from the coronavirus pandemic remains uncertain and fragile.

UK Markets ended the week in negative territory, after the Bank of England (BoE) signalled the possibility of negative interest rates.

In the UK, average earnings including bonus fell less market anticipations in July.

In the UK, the house price index accelerated in June.

UK’s retail sales advanced for the fourth consecutive month in August.

In the UK, the Rightmove house price index rebounded in September.

UK’s consumer price inflation slowed to a near five-year low in August.

UK’s ILO unemployment rate rose at par with market expectations in July.

UK’s non-seasonally adjusted output producer price index (PPI) dropped in August.

In the UK, the retail price index dropped in line with market forecast in August.

The BoE, in its latest monetary policy decision, kept its key interest rate unchanged at 0.10%, as widely expected and maintained its quantitative easing (QE) programme at £745 billion. However, the BoE hinted that it might consider negative interest rates as the economy faces a surge in coronavirus infections and the risk of a no-deal Brexit. Meanwhile, the central bank expects GDP to be around 7% below its 2019 Q4 level. Also, the outlook for the economy remains unusually uncertain.

European Markets ended the week on a negative footing, amid mounting concerns over rising coronavirus cases.

Eurozone’s seasonally adjusted industrial production rose more than market forecast in July.

In the Eurozone, the ZEW economic sentiment index climbed in September.

Eurozone’s seasonally adjusted trade surplus expanded for the third straight month in July.

In the Eurozone, seasonally adjusted construction output advanced in July.

Eurozone’s current account surplus narrowed less-than-expected in July.

In the Eurozone, the final consumer price index (CPI) dropped at par with market anticipations in August.

Germany’s ZEW current situation index improved in September.

In Germany, the ZEW economic sentiment index unexpectedly rose in September, marking its highest level since May 2000.

Germany’s PPI dropped at its slowest pace in five months in August.

US Markets ended the week in red, as disappointing US economic data renewed fears about sluggish economic recovery.

US NY Empire State manufacturing index strengthened in September.

The NAHB housing market index unexpectedly advanced in September, marking its highest level in the survey’s 35-year history.

Business inventories advanced in line with market expectations in July.

The Michigan consumer sentiment index climbed more-than-expected in September.

US initial jobless claims dropped less than market consensus on a weekly basis in the week ended on 11 September 2020.

US leading indicator increased less than expected in August.

Manufacturing production rose less-than-anticipated on a monthly basis in August.

Industrial production grew less than market forecast on a monthly basis in August.

US retail sales rose less-than-expected in August.

The MBA mortgage application fell in the week ended 11 September 2020.

The Philadelphia Fed manufacturing index fell for the third consecutive month in September.

US building permits unexpectedly slid in August.

In the US, housing starts declined in August.

US current account deficit widened in 2Q20.

The US Fed, in its latest monetary policy decision, kept its key interest rate unchanged at 0.25%, as widely expected and pledged to keep interest rates near zero until inflation rises consistently. Meanwhile, Fed officials expect interest rates to remain at or near zero through at least 2023. Moreover, the committee expects a full-year GDP decline of 3.7%, from 6.5% drop forecasted in June. However, it lowered its 2021 outlook to 4% from 5% and 2022 to 3% from 3.5%. Also, the committee expects a 2.5% GDP growth in 2023.

Asian Markets ended mostly weaker last week, following their US counterparts.

Australia’s house price index advanced on a yearly basis in 2Q20.

In Australia, the Westpac leading index rose on a monthly basis in August.

Australia’s unemployment rate unexpectedly dropped in August.

In Australia, the HIA new home sales unexpectedly plunged in August.

China’s industrial production accelerated in August.

In China, retail sales advanced for the first time in 2020 in August.

In Japan, industrial production jumped on a monthly basis in July.

Japan’s total merchandise trade surplus unexpectedly widened in August.

In Japan, the national CPI advanced less-than-anticipated in August.

The Bank of Japan kept its key interest rate unchanged at -0.10%, as widely expected.

The Reserve Bank of Australia (RBA), in its latest monetary policy meeting minutes, reiterated that it would not increase its cash rate target until progress is made towards full employment and inflation. The policy makers noted that the downturn had not been as severe as earlier expected and a recovery was underway in most parts of Australia. Further, the central bank indicated that it would maintain its “highly accommodative settings” as long as required to support the economy.


Currency Update

The EUR ended lower against the USD last week, after Eurozone’s consumer prices declined in line with market expectations.
The British Pound ended stronger against the greenback last week, following news that the British government striked a deal with Tory rebels over Internal Market Bill.
The US Dollar ended mostly weaker against its major counterparts last week, amid dismal US economic data and Fed's dovish remarks.


OECD warns global economic outlook “remains exceptionally uncertain”

The OECD upgraded its global economic forecast for 2020. Accordingly, it now expects world economy to shrink 4.5% this year, less than the 6% drop estimated in June. However, the Organisation stated that 2020 will still mark the worst contraction in growth since World War 2. Additionally, the agency indicated that global economy is not doing as bad as previously expected, especially in the US and China, but has still suffered an unprecedented drop due to the coronavirus pandemic. Further, US 2020 GDP was forecast to fall 3.8%, which was revised sharply from -7.3% projected in June. At the same time, China's GDP is expected to grow 1.8% versus previous forecast of -2.6%. Nonetheless, the outlook “remains exceptionally uncertain” due to the coronavirus pandemic.


The Week Ahead

Going ahead this week, investors will keep a tab on the US Chicago Fed National Activity index, existing home sales, housing price index, Fed Chairman Jerome Powell’s speech, the Markit manufacturing and services PMIs, initial jobless claims, new home sales and durable goods orders for further direction. Additionally, Eurozone’s consumer confidence index, the Markit manufacturing and services PMIs along with Germany’s GfK consumer confidence index, the Ifo indices, and the Markit manufacturing and services PMIs will keep investors on their toes. Also, UK’s Markit manufacturing and services PMIs, the GfK consumer confidence index, the BoE Governor Andrew Bailey’s speech and the Markit manufacturing and services PMIs would garner significant amount of investor attention.


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