Weekly Wrap – Stats, Geopolitics, and Monetary Policy Drove the MajorsIt was another busy week for the global financial markets. Economic data, monetary policy and geopolitics kept the markets on their toes.
It was a relatively busy week on the economic calendar in the week ending 20th September.
A total of 52 stats were monitored throughout the week, compared with 65 in the week prior.
Of the 52 stats, 21 came in ahead forecasts, with 24 economic indicators coming up short of forecast. 7 stats were in line with forecasts in the week.
Looking at the numbers, 19 of the stats reflected an upward trend from previous figures. Of the remaining 33, 31 stats reflected a deterioration from previous.
While the economic data was skewed to the negative, the Dollar found support on Friday to end the week in positive territory.
The U.S Dollar Index (“DXY”) rose by 0.21% to end the week at $98.462.
Out of the U.S
It was a relatively quiet start to the week, with NY Empire State Manufacturing Index and industrial production figures out on Monday and Tuesday.
The numbers were mixed, with industrial production on the rise in August, while manufacturing sector activity saw slower growth in NY State.
Mid-week, housing sector data impressed, with building permits and housing starts surging by 7.7% and by 12.3% respectively.
In the 2nd half of the week, the Philly FED Manufacturing Index and existing home sales provided direction.
While existing home sales impressed, the manufacturing sector activity in Philly also slowed in September.
In spite of the impressive numbers, the market focus remained on the main event of the week, which was the FED interest rate decision on Wednesday.
The FOMC cut rates by 25 basis points, with FED Chair Powell talking up the U.S economy. Powell held back from talks of further rate cuts in the coming months, however.
In the equity markets, the U.S majors closed out the week in the red, ending a run of 3 consecutive weekly gains. The Dow led the way, falling by 1.05%, with the S&P500 and NASDAQ declining by 0.51% and 0.72% respectively.
Out of the UK
It was a busy week on the economic calendar.
Economic data included August inflation and retail sales figures released on Wednesday and Thursday.
Inflationary pressures eased in August, with the annual rate of inflation softening from 2.1% to 1.7%, pinning the Pound back.
On Thursday, retail sales also disappointed, with sales falling by 0.2%, month-on-month in August.
The BoE was also in action on Thursday, holding rates steady, whilst downwardly revising growth forecasts.
There were no major surprises, however, with Brexit continuing to be the key driver.
Positive comments from EU Commission President Juncker provided the Pound with much-needed support. Juncker said that he thought a deal would be possible by 31st October and that he was keen to avoid a no-deal Brexit.
At the end of the week, there was some downward pressure as the markets looked towards the Supreme Court ruling on the lawfulness of Parliament’s suspension.
The Pound ended the week down by 0.18% to $1.2478, with a 0.38% loss of Friday dragging the Pound into the red for the week.
For the FTSE100, a softer Pound failed to deliver, with the index falling by 0.31%, also ending a run of 3 consecutive weeks in the green.
Out of the Eurozone
It was a relatively quiet week on the economic data front.
On Tuesday, Germany and the Eurozone’s economic sentiment figures provided the EUR with support.
Germany’s ZEW Economic Sentiment indicator rose from -44.1 to -22.5 in September. The upside came in spite of the current conditions indicator falling from -13.5 to -19.9. Sentiment across the Eurozone also improved, with the indicator rising by -43.6 to -22.4.
Through the week, finalized August inflation figures out of Italy and the Eurozone had a muted impact on the EUR.
At the end of the week, the Eurozone’s consumer confidence saw a marginal improvement, but not enough to support the EUR.
For the week, the EUR fell by 0.51% to $1.1017.
For the European major indexes, the DAX30 ended the week flat, while the CAC40 and EuroStoxx600 rose by 0.62% and by 0.30% respectively.
It was a bearish week for the Aussie and Kiwi Dollars.
The Aussie Dollar slid by 1.64% to $0.6766, with the Kiwi Dollar tumbling by 1.87% to $0.6258.
For the Aussie Dollar
It was a quiet week, with the stats skewed to the negative.
At the start of the week, the house price index reported a further decline in house prices in the 2nd quarter. The Index fell by 0.7%, following a 3% slide in the 1st quarter.
Of greater significance, however, were employment figures released on Thursday. A rise in the unemployment rate and fall in full-time employment weighed on the Aussie Dollar.
On the monetary policy front, the RBA meeting minutes failed to influence, with the language largely unchanged from the month prior.
For the Kiwi Dollar
Stats included 3rd quarter consumer sentiment figures on Tuesday and 2nd quarter GDP figures on Thursday.
Consumer sentiment failed to improve in the 3rd quarter, with the Westpac Consumer Sentiment Index falling from 103.5 to 103.1.
In the 2nd quarter, the economy grew by 0.5%, which was down from 0.6% in the 1st quarter. While better than forecasted, however, which provided is was of little support to the Kiwi Dollar.
For the Loonie
It was a busy week on the economic data front.
Key stats included July manufacturing sales figures on Tuesday, August inflation figures on Wednesday and July retail sales figures on Friday.
The numbers through the middle of the week were skewed to the negative. Manufacturing sales slid by 1.3%, following a 1.4% fall in June.
Of greater significance was a softening in inflationary pressures. The annual core rate of inflation eased from 2% to 1.9%, coming up well short of a forecasted 2.2%. Month-on-month, consumer prices fell by 0.1%.
On Friday, retail sales also failed to provide support. Core retail sales fell by 0.1% in July, following a 0.9% rise in June. Economists had forecast a 0.2% rise.
The Loonie suffered in spite of retail sales rising by 0.4%, reversing a 0.2% fall in June.
The Loonie ended the week up by 0.19% to C$1.3263 against the Greenback. The gains came in spite of the weak stats, with monetary policy divergence and the jump in crude oil prices providing support.
For the Japanese Yen
Economic data was mixed throughout the week.
On Wednesday, August trade data came in better than expected. The trade deficit narrowed from ¥250.7bn to ¥136.2bn, supported by a larger than anticipated fall in imports and smaller fall in exports.
While the numbers were positive, exports to China, North American and the EU were on the slide in the month.
At the end of the week, inflation figures failed to impress, with Japan’s annual rate of inflation easing from 0.6% to 0.5%.
On the monetary policy front, the BoJ stood pat on Thursday, whilst signaling the possibility of further easing next month.
For the week, the Japanese Yen rose by 0.49% to ¥107.56.
Out of China
It was a relatively busy week on the economic calendar. Fixed asset investments, industrial production, retail sales, and unemployment figures provided direction on Monday.
The stats were skewed to the negative, supporting the risk aversion at the start of the week that stemmed from the attacks on Saudi oil fields.
In spite of the disappointing numbers, hopes of a resolution to the U.S – China trade war limited the impact of the numbers on the day.
On the policy front, the PBoC was also in action on Friday. The PBoC lowered the 1-year Loan Prime Rate from 4.25% to 4.20%. Economists had forecast a 10 basis point cut.
Whilst the rate cut was market positive, China’s decision to not visit U.S farms on Friday riled the markets late on. Trump’s reaction ahead of high-level trade talks suggested that an end to the trade war was not a slam dunk…
The Yuan fell by 0.17% to CNY7.0909 against the Greenback.