The Weekly Wrap – Economic Datta and COVID-19 Hit Riskier AssetsIt was a busy week for the markets. COVID-19 updates, a bank scandal, and disappointing economic data recemented the Dollar’s safe-haven status.
It was a quiet week on the economic calendar, in the week ending 25th September.
A total of 32 stats were monitored, following 69 stats from the week prior.
Of the 32 stats, 13 came in ahead forecasts, while 17 economic indicators came up short of forecasts. 2 stats were in line with forecasts in the week.
Looking at the numbers, 15 of the stats also reflected an upward trend from previous figures. The remaining 17 stats reflected a deterioration from previous.
For the Greenback, the recovery continued following last week’s pullback. In the week ending 25th September, the Dollar Spot Index rallied by 1.85% to 94.624. In the week prior, the Dollar had fallen by 0.44% to 92.926.
Out of the U.S
It was a relatively quiet week on the economic data front.
Key stats included September’s prelim private sector PMIs, the weekly jobless claims, and August durable goods and core durable orders.
The stats were skewed to the negative in the week.
Service sector growth slowed marginally, with the PMI slipping from 55.0 to 54.6, which weighed on the composite. The manufacturing sector saw a pickup in growth, however, with the PMI rising from 53.1 to 53.5.
Labor market numbers also disappointed. In the week ending 18th September, initial jobless claims came in at 870k. This was up from 866k from the week prior.
At the end of the week, durable goods orders and core durable goods orders wrapped up the week.
In August, durable goods orders rose by 0.4%, with core durable goods orders also rising by 0.4%. The numbers fell well short of forecasts and increases in July.
FED Chair Powell was also a key driver in the week.
Giving testimony on Capitol Hill, Powell talked of the need for more support from all levels of the U.S government. The FED Chair called for more government support to speed up the economic recovery. Powell noted that the outlook remained dependent upon the containment of the coronavirus. Aligned with other central banks, Powell also pointed out that, while the economy is showing a marked improvement, uncertainty remained.
In the equity markets, the NASDAQ rose by 1.11%, while the Dow and S&P500 fell by 1.75% and by 0.63% respectively.
Out of the UK
It was a quieter week on the economic calendar.
Key stats included September’s prelim private sector PMIs and CBI Industrial Trend Orders.
The stats were also skewed to the negative.
For September, the CBI Industrial Trend Orders fell from -44 to -48. Economists had forecast a rise to -40.
Of greater significance, however, was slower service sector growth at the end of the 3rd quarter.
The services PMI fell from 58.8 to 55.1. Manufacturing sector activity also slowed, with the PMI falling from 55.2 to 54.3.
Following the talk of negative rates, the stats were not bad enough to force a move by the BoE.
A reintroduction of containment measures could adversely affect the path of the economic recovery, however.
On the Brexit front, failing hopes of a trade agreement between the EU and Britain also weighed.
In the week, the Pound slid by 1.32% to $1.2746, reversing a 0.95% gain from the previous week.
The FTSE100 ended the week down by 2.74%, following a 0.42% decline from the previous week.
Out of the Eurozone
It was another busy week on the economic data front.
Key stats included consumer and business confidence figures and prelim private sector PMIs for September.
It was a mixed bag on the data front.
Eurozone and German consumer confidence saw marginal improvements but not enough to impress. From Germany, business confidence also improved, while coming up short of forecasts.
Key in the week, however, was the prelim PMIs.
While manufacturing sector activity picked up in September, service sector activity slumped, raising concerns over the economic recovery.
France, Germany, and the Eurozone saw a contraction in the services sector. Partially offset by a pickup in the manufacturing sector activity, private sector activity stalled at the end of the quarter.
The Eurozone’s services PMI fell from 50.5 to 47.6, with the composite PMI declining from 51.9 to 50.1. On the positive, was a rise in the manufacturing PMI from 51.7 to 53.7.
While the stats provided direction, a spike in new COVID-19 cases in Europe weighed heavily on the EUR. Concerns over the possible need to reintroduce lockdown measures drove demand for the safety of the Greenback.
For the week, the EUR slid by 1.77% to $1.1631. In the week prior, the EUR had fallen by 0.05% to $1.1840.
For the European major indexes, it was a particularly bearish week. The CAC40 and DAX30 slid by 4.99% and by 4.93% respectively, with the EuroStoxx600 falling by 3.60%.
For the Loonie
It was a particularly quiet week on the economic calendar.
Economic data was limited to August house price figures that had a muted impact on the Loonie.
Concerns over the global economic recovery amidst the spike in new COVID-19 cases weighed on crude oil prices and the Loonie.
The Loonie fell by 1.38% to end the week at C$1.3386. In the week prior, the Loonie had fallen by 0.19%.
It was a particularly bearish week for the Aussie Dollar and the Kiwi Dollar.
In the week ending 25th September, the Aussie Dollar slid by 3.54% to $0.7031. The Kiwi Dollar wasn’t far behind, ending the week down by 3.15% to $0.6546
For the Aussie Dollar
It was another quiet week for the Aussie Dollar on the economic calendar.
There were no material stats from Australia to provide the Aussie Dollar with direction.
The lack of stats left market sentiment towards COVID-19 and the global economic recovery to sink the Aussie.
For the Kiwi Dollar
It was a relatively quiet week on the economic calendar.
Key stats included August trade figures that failed to support the Kiwi Dollar late in the week.
In August, New Zealand’s trade balance slid from a NZ$447m surplus to a NZ$353m deficit. Year-on-year, however, the trade surplus widened from NZ$50m to NZ$1,340m.
A sharp fall in imports and a rise in Kiwi fruit and aircraft drove the trade surplus to its largest since 2014.
On the monetary policy front, the RBNZ was also in action mid-week. Following the talk of negative rates in the month prior, the RBNZ continued to promise further support if needed. In the RBNZ Statement, the RBNZ stated that additional support could come in the form of Funding for Lending Programme (FLP), a negative OCR, and purchases of foreign assets.
For the Japanese Yen
It was a relatively quiet week on the economic calendar.
September’s private sector PMIs were in focus mid-week.
While the numbers were on the positive side, the private sector continued to contract at a marked pace in September. The Manufacturing PMI rose from 47.2 to 47.3, with the Services PMI rising from 45.0 to 45.6.
According to the prelim survey, new orders fell at a weaker pace, while new export orders fell at a stronger pace.
The pace of job shedding eased across the private sector, while the backlogs of work rose at a stronger pace.
Optimism improved across the private sector in spite of the stronger decline in new export orders.
September’s PMIs reaffirmed the BoJ’s statement last week that the Japanese economy was in a serious condition.
The Japanese Yen fell by 0.97% to ¥105.58 against the U.S Dollar. In the week prior, the Yen had risen by 1.50%.
Out of China
It was a particularly quiet week on the economic data front.
There were no material stats to provide the Yuan direction in the week.
On the monetary policy front, the PBoC was in action, however. In line with forward guidance from the summer and market expectations, the PBoC left loan prime rates unchanged.
On the geopolitical front, tensions between the U.S and China continued to hit the global financial markets.
Early in the week, Trump continued to blame China for the COVID-19 pandemic at the UN National Assembly. The war of words continued in the week.
In the week ending 25th September, the Chinese Yuan fell by 0.81% to CNY6.8238. In the week prior, the Yuan had risen by 0.95%.
The CSI300 and Hang Seng fell by 3.53% and by 4.99% respectively.