United States

The S&P 500 rose 17.14 points, or 0.8%, to close at 2,168.27 on Friday although the index was down 0.1% in September, the Nasdaq Composite closed at 5,312.00, adding 1.7% in September. Moreover, the Dow Jones Industrial Average gained 0.9% but fell 0.8% for the month. Analysts have blamed weak corporate profit, along with political uncertainty, as a major obstacle preventing the market from breaking out higher.

Treasury yields increased in September for a second consecutive month, logging the largest two-month gain since November 2015, on growing market expectations that the Federal Reserve could raise interest rates by the end of the year. Over the week, 10Y Treasury note (used as the benchmark) yield fell by 1 basis point but over the month it gained 3.7 basis points.

The euro rebounded on Friday after briefly touching a one-week low against the U.S. dollar as shares of Deutsche Bank bounced back. EURUSD was trading at around $1.1238 on Friday. Meanwhile, the dollar strengthened against the yen as investors regained their appetite for assets perceived as risky: one greenback bought ¥101.38 late Friday, compared with ¥101.16 late Thursday. However, the dollar declined modestly against the euro and yen during the third quarter, which analysts blamed on the Federal Reserve’s unwillingness to raise interest rates. As a matter of fact, it fell 1.8% against the yen, while the euro gained 1.3%.

Consumer Confidence reached 104.1 which was above expectations of 99.0. In addition, GDP annualized (2Q) came in at 1.4%, beating expectations of 1.3%. Finally, US Composite PMI hit 52.0, higher than the previous one (51.5).

European Union

During the recent week the European stock and bond markets have been particularly volatile, primarily due to a rollercoaster in Deutsche Bank share price and weakening prices of other European banks such as Commerzbank, UniCredit, Societe Generale, Santander. Indeed, Deutsche Bank share price tumbled on Thursday by 7.16% to below €10, the lowest level since 1983, following the reports that some of its clients pulled their business from the bank. Furthermore, on Friday afternoon, upon Deutsche Bank seniors flew to the US to negotiate with DoJ $14bn fine, the price recovered to €11.71, gaining 16.13% in a single day.

On Friday morning DAX Index opened at 10,241, plunged to its weekly low of 10,201, then gained 3.04% and closed at 10,511. Overall, during the week the index has lost 1.09%. Meanwhile, Euro Stoxx 50 plunged by 0.99%.

Bond prices have been also influenced by Deutsche Bank share price dynamics. Yield on German 10Y bund has dropped to -0.16 on Thursday, its lowest level after Brexit. Throughout the week EUR/USD spot rate ranged from $1.1270 highs to $1.1155 lows and closed at $1.1240. On Thursday, upon abrupt sell-off of Deutsche Bank stocks, euro has devalued by 0.6% against the dollar.

Unemployment rate in Eurozone holds at five-year low at 10.1%, while monthly inflation in September reached its highest level since July 2014 (0.4%).


After OPEC struck the deal to cut oil production, oil and commodity stocks rallied. Royal Dutch Shell increased by 6.15% since Thursday opening, Tullow Oil surged by 16.1%, BHP Billiton by 5.9% and UK-based BP by 4.4%.

Regarding the equity market FTSE 100 closed at 6,899.33 on Friday, 0.2% down from Monday opening. Meanwhile, GBP/USD rate remained relatively flat during the week and closed on Friday at 1.2979. As stock and commodity prices picked up, UK gilts have seen steep sell-off on Thursday. The 10Y gilt yield jumped 6.3 basis points to 0.74%, its biggest daily rise since early September.

Inflation expectations continue to rise and stand above 2.69% level. This is caused by devaluation of the pound after Brexit and recent spike in oil prices. Overall, UK economy grew better than expected and the forecast for Q2 GDP growth is revised to 0.7%.

Rest of the World

During the meeting in Algeria, OPEC surprised markets by announcing that its members had reached a preliminary deal to reduce oil output, the first cut in production since 2008. Oil prices surged after the announcement. However, few details were provided about how much each country would trim back. More details will be available at the meeting in November.

However, Asian shares traded lower Friday as doubts grew about a plan to limit production of oil, and as Deutsche Bank worries continued to rattle global markets. In fact, the Nikkei Stock Average ended down 1.5% and Hong Kong’s Hang Seng Index fell 1.9%, but the Shanghai Composite closed up 0.2%.

Emerging-market equities experienced their steepest drop since Brexit. The iShares MSCI Emerging Market ETF (the most widely used benchmark for the region) dropped 3.4% to 36.71 on Friday, its lowest level in more than a week. The move came amid heightened concerns that the Federal Reserve would raise interest rates.


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