[edmc id= 2948]BSIC Weekly Market Brief[/edmc]
United States
The new positive data regarding the labour market and the speech of the FOMC regarding the recent decision of the FED not to hike interest rates have impacted US markets in the past week.
For what concerns the labour side, the Initial Jobless Claims was highly relevant. This metric shows the number of new weekly requests for unemployment benefits: the reported number (263K) was well below expectations (274K), strengthening confidence on the equity side. Earlier in the week, however, ISM Non-Manufacturing PMI came in below expectations.
The FOMC speech revealed a still worrying level of inflation for the central bank, suggesting a possible remittal of an increase in the interest rates. This has been read as a sign of expansive policy by the markets, with notable effects on the domestic currency. The decision whether to hike the level of interest rates in the zone is still uncertain for what concerns the timing.
Due to these facts, the S&P 500 increased its value by more than 2.30% this week, closing at 2.012,27 on Friday night, while the NASDAQ reached the 4.830,47 (gaining 1.84% during the week). On the FX market, the USD has seen a depreciation with respect to the EUR and it is traded at 1,1362.
Moving to next week, the data regarding the PPI for September will be released on Wednesday, while CPI for the same month will be out on Thursday.
European Union
This was the strongest week for European stocks since January. Indeed, all major European stocks indices experienced increases of 5.6%-7% versus the previous week. This increase was mostly driven by the rally of carmakers and commodity producers: for instance, Glencore had its best week ever with a gain of 40%.
Investor stronger appetite for riskier assets was followed by the lower demand for the safe European government bonds. The yield on 10 year Bund is 0.62% (5 basis points higher than the previous week), while the yield on 10y Italian government bond is 1.70%, which is 10 basis higher with the respect to the previous week.
Moving to macroeconomic data, the Markit Eurozone Retail PMI and Markit Eurozone Services PMI for September were published. The first resulted 51.9, while the Markit Eurozone Services PMI was 53.7, which is 0.3 lower than forecasts. German Industrial Production (MoM) for August came in at -1.2%, which is also below the forecasted level of 0.2%. Another important data released this week was Eurozone Retail Sales (YoY) for August, with a value of 2.3%.
Even as speculation mounted that the European Central Bank might extend its asset purchase scheme beyond September next year, the Euro appreciated against the Dollar by about 1.2% compared to the previous week.
Looking at next week, German ZEW Survey (financial experts make a medium-term forecast about Germany economic situation) and Eurozone CPI (MoM) for September will be published.
United Kingdom
On Monday, the September Services PMI figure came in at 53.3, well below the expected level of 56, showing a slowdown in UK services. Moreover, UK house prices fell in September by 0.9% (according to the Halifax Index published on Tuesday). Expectations pointed to an increase of 0.1%. Those negative data were partly counterbalanced by industrial and manufacturing production growth (August figures), which resulted higher than expected. Finally, goods and services trade deficit shrank by £1.2bn in August to £3.3bn, mainly thanks to strength in auto and chemical exports.
What markets were really looking at was, however, Thursday. Nevertheless, the BoE left interest rates unchanged (as widely expected by analysts). Only one member (McCafferty) of the MPC voted in favor of an immediate rate hike, a risky move according to the other 8 members due to global growth and inflation slowdown. The tones appeared rather dovish.
Moving to markets, FTSE 100 closed the week higher, also helped by the positive performance of markets around the world. GBP appreciated against USD, rebounding from the lowest level in a month, ending the week at 1.533.
Next week, CPI and unemployment rate will give further information to evaluate the state of the British economy.
Elsewhere in the world
With Chinese and other Asian markets closed for a couple of days due to national holidays, there were limited relevant macroeconomic announcements.
However, it is worth mentioning that IMF cut its global growth forecast for the second time in 2015 to 3.1% (from 3.3%). Main reasons cited are slower growth of emerging markets, especially China, and commodity prices decline.
Looking forward, China will disclose its CPI figures early next week, while Australia will reveal some figures regarding its labour market: both data may have been impacted by commodities rout.
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