United States

The main news in the United States this week was the job report published on Friday which revealed that job gains of 156,000 jobs were slightly below consensus estimates of 175,000 in September. The key takeaways of the report are that the job growth is healthy even though the hiring momentum has slowed since monthly job gains have averaged 169,000 over the past six months, compared to 238,000 in the preceding six-month period. Furthermore, the job report offers no clear signal for the FED concerning a possible rate hike until the end of this year. Right now the fed funds futures imply a probability of about 14% for a rate hike in November and a 64% probability for a rate hike in December. The yield on the benchmark 10-yr note climbed as high as 1.76% from last Friday’s settlement of 1.60% before ending the week at 1.72%.

Despite stronger than expected vehicle sales and manufacturing data stocks slightly fell with the S&P 500 closing at 2,154 which is about 0.7% lower than last week. Notably, the biggest losers for the week were sectors that had previously been big winners.  That included the utilities, telecom services, and real estate sectors. Those sectors were down between 3.0% and 5.0% for the week.

Next week Monday, the Fed will release its September meeting minutes and on Friday, consumer sentiment data will be released.

European Union

On Monday, a report from HIS Markit showed the PMI for manufacturing increased from August’s value of 51.7 to 52.6 in September, aligned with expectations. The growth was led by Germany (which registered a 3-month high) Netherlands and Austria, while Spain, Italy and Ireland showed signs of weaker improvements and manufacturing in Greece declined.

On Tuesday, European PPI for August (MoM) was reported to be at -0.2%, under the expectations on -0.1%. On Wednesday, retail sales MoM for the EU were announced at -0.1%, higher the predicted figure of -0.3%.

On Friday, French Current Account beat forecasts of -€4.4b, coming at -€2.1b, while the French Trade Balance confirmed forecasts of -€4.3b.

After Deutsche Bank’s shares rebounded on Friday because of the news of an agreement between the bank and the DoJ (which would settle the sanction at $5.4 billions), the stock traded in the Frankfurt Stock Exchange close to €12.1510 on Friday (+20.54% from last week Thursday, +3.80% from last week Friday).

Rumours were spread about a possible reduction of €10bn per month in the ECB bond purchase program. However, on Friday during the Annual Meeting of the IMFC in Washington, Mario Draghi confirmed the central bank’s forward guidance on the bond purchase and on interest rates. He stated: “We have confirmed our forward guidance on asset purchases and our policy interest rates, indicating that the ECB intends to run asset purchases until the end of March 2017 or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation towards levels below, but close to, 2% over the medium term”.

Germany 10-year Bond yield increased during the week from -12bp on 30 Sept. to +2.1 bp on Friday 7 Oct., leaving negative territory. German DAX lost 0.19% during the week and closed 10490.86 on Friday

Euro Stoxx 50 peaked on Tuesday at 3029.50 and declined in the following day. It closed on Friday at 3000.57, near the closing of the previous week at 3002.24 (-0.06% change over the week).


On Monday, Prime Minister Theresa May announced that the process of withdrawal from the EU will begin by the end of March 2017 when the Article 50 will be invoked. Her speech at the Conservative Party’s annual conference suggested that the UK’s path is heading to a “hard” Brexit (with limited access to the single market).

On the following day, three senior figures in May’s administration declared that he government will refuse to prioritize the protection of the financial sector after the U.K. has left the European Union.

On the same day, manufacturing PMI for the UK exceeded the 52.1 expected by economists and reached 55.4 in September, the highest in two years.

On Friday, both British Industrial Production and Manufacturing Production for August (MoM) disappointed the prediction and was declared respectively at -0.4% (against 0.1% expected) and 0.2% (against 0.5% expected). UK’s Trade Balance for August was at -£12.11b, lower that expectations of -£11.30b.

Following the announcements on Brexit’s negotiations, the pound dropped against the USD by 1.02% and 0.9% in the first two days of the week. On Friday, in the first minutes of Asia trading, the sterling fell abruptly by more than 6% and partially recovered right after. Even if the trigger of the movement is uncertain, the sell-off was probably boosted by algorithmic transactions. Overall, GBP/USD decreased by 4.18% during the week to 1.2434$, reaching the lowest level since 1985.

The FTSE 100 index rose by 2.25% through the week and closed at 7044.39 on Friday, primarily due to the declining pound.

Rest of the World

Emerging markets equities are currently driven by expectations concerning increasing interest rates in the US as well as the rebound in oil and other commodities. Moreover, this week analysts increased their profit projections for companies in the MSCI EM Index by the most since 2011. Therefore, the Emerging markets ETFs received net inflows of about 817 million USD in the past five days, taking inflows this year to almost 26 billion USD according to data from Bloomberg.

Overall, the performance of the main indices was slightly positive with, for example, the Hang Seng Index closing at 23,851 points which is about 0.9% higher than last week.


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