US
The Dow Jones Industrial Average closed at 26,573.72 on Friday recording a weekly loss of 0.9%. The S&P 500 closed at 2,952.01 down 0.3% w-o-w. These numbers outline a 3rd straight week of negative returns for US equities.

The US market was primarily impacted by 3 key data releases in manufacturing, unemployment, and wages. Additionally, the Trump impeachment inquiry and US-China Trade War developments caused extra uncertainty about the future of US economic policy.

The key driver of 2019’s first two consecutive days S&P 500 decline exceeding 1% daily on Tuesday and Wednesday was the Institute for Supply Management’s (ISM) Manufacturing Report. The manufacturing index fell for the sixth consecutive month to its lowest level since 2009.

While unemployment reached its 50-year low at 3.5%, job creation missed the mark with 136k jobs created in September as opposed to the 145k expected by the markets. This is also accompanied by the not-so-positive news of decelerating wage growth, with the September growth numbers showing a 40bps drop from August at 2.9%.

For the upcoming week, we will be looking at the Producer Price Index (PPI) on Tuesday, inflation readings on Thursday, and consumer sentiment on Friday. Furthermore, further trade negotiations between the US and China are set to take place on Thursday and Friday.

UK

This week the UK was faced with more weak data releases, which increased expectations of rate cuts. The UK services Purchasing Managers’ Index (PMI) fell below 50, a key level that separates expansion from contraction, waving a red flag for the sector that makes up 80% of the UK economy. Additionally, further pressure for the Bank of England to cut its benchmark interest rate was added by a weak employment survey.

The main equity index for the UK, i.e. the FTSE 100 closed at 7,155.38, reflecting a 3.5% negative change over a week ago.

Europe

Just like the UK, Europe hasn’t fared well in the past week. The STOXX Europe 600 index fell by almost 3%, joint by similar losses in the German DAX.

Key news that shook the EU market was the US’ announcement of 25% tariffs on a range of EU products. The tariffs are said to impact $7.5B worth of goods and focus on civil aircraft, cheese, olives, wine, and whiskeys. The tariffs come after a World Trade Organization (WTO) ruling allowed the US to retaliate for the government aid given to Airbus by several EU countries, which negatively impacted its domestic producer Boeing.

The manufacturing recession in Germany continues, now also showing its adverse impact in the services sector. German economic institutes took these signals very seriously and cut the country’s economic growth forecasts by 30 bps to 0.5%

RoW

Japan’s Nikkei fell 2.1% this week. The release of the third-quarter Tankan index signalled that Japanese manufacturing sentiment is facing challenges from the US-China Trade War and the general global macroeconomic outlook. Exports are now declining for their 9th consecutive month.

China’s economy continues to centre around trade talks with the US. An especially important event will take place on October 8, when mainland stock markets reopen following their closing between October 1 – 7 for the 70th anniversary of the founding of the People’s Republic of China. Market movements that day will show how further developments in the Trade War materialized on investor sentiment. Additionally, investors fear potential restrictions on US investments in Chinese companies although the White House has labelled the reports as false thus far.

On the oil markets, prices seem to have cooled off after the Saudi Arabia oil attacks, with the WTI Crude hovering below the $53 mark, and Brent Crude settling below $59 at the end of the week.

 


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