United States

The post-financial crisis US equity rally this week overtook the 1949-56 run to become the second-strongest bull market in US history. The S&P 500 closed the week at $2,500.23, a new record high. North Korea missile tests and possible Fed balance sheet tightening were ignored by the market, that instead focused on the strong Corporate earnings and positive outlooks on the global GDP growth. Hurricane Irma had a less severe impact on the US than some had feared, having a reassuring effect on the market. Fear of a market reversal has led many investors to buy hedges against a possible market downturn: a Bank of America survey revealed the biggest jump in the net number who said they had bought hedges in over a year.

The yield on the 10-year US Treasury, meanwhile, was flat at 2.20 per cent, although the two-year yield was up another 2 basis points at 1.38 per cent, taking it 11bp higher over the week. Next Fed meeting is on the 20 September; no major news is expected and the Fed fund rates will probably stay constant 1-1.25. A rate hike is however expected before the ending of the year with a 55 per cent probability, up from 38 per cent a week earlier. The US national debt has reached his peak at above 20 trn USD. In the previous week, republicans and democrats reached an agreement to raise the debt ceiling, fund the federal government through 8 December and provide $15bn for relief from Hurricane Harvey, which hit Texas and Louisiana last month. Overall, economic data recently released suggest strong fundamentals and inflation in line with its 2% target level.

Regarding the Forex, nothing seems to stop the plummeting of the dollar index, which closed at 91,83. The Euro/USD closed the week at 1.19447 USD.

Next week important data will be released on Wednesday; Fed fund rates decision and crude oil inventories.


The main European stock markets rallied on the week ended September 15th, 2017. As markets started recovering from the ECB statement of last Thursday, most of the gains were made on Monday while remaining stable during the rest of the week. The FTSE MIB reached a year-high of 22,324.77, before closing down at 22,229.49 (+2.08% from previous week). The DAX closed at 12,518.81 (+1.75%), the CAC 40 closed at 5,213.91 (+1.96%) while the EUROSTOXX 50 closed at 3,515.55 (+2.49%)

The Euro saw a depreciation (-0.68%) with respect to the Dollar in the first part of the week reaching a week-low of 1.1874 but regained on Friday, closing at 1.1940 on Friday. On Wednesday, European Commission President Jean-Claude Juncker delivered his annual State of the Union Address before the members of the European Parliament. He outlined his vision for a more united Europe, with proposals to merge the presidencies of the European Commission and the European Council, to strengthen the Eurozone and expanding the Schengen area as well as moving forward with the Banking union.

The German, French and Italian CPI for the month of August were released this week, in line with forecasts and stable from the previous values, respectively at 0.1%, 0.5% and 0.3% MoM. On Friday 15th, the rate of the Eurozone wage growth YoY for Q2 was released. At 2%, it’s the highest in the last two years and could be an indicator of a rising inflation.

With regard to the fixed income market, the German 10y Bund yield closed at 0.43% with the Italian respective at 2.078% and the French one at 0.71%.

Next week’s main announcements will be on Monday the rate for CPI for the Eurozone (forecast: 1.5%), on Tuesday the German ZEW Economic Sentiment (forecast: 12.5) and on Friday the French and German Manufacturing PMI for September (forecast: 55.5 and 59.0 respectively).


This week, the most important driver of UK markets was the meeting of the Bank of England. The BOE maintained the key policy rate unchanged at 0.25%. The purchase programs of UK sovereign debt and investment-grade corporate bonds were unchanged as well. However, the BOE released a hawkish statement on Thursday pointing out that the market was underpricing future interest rate hikes. Market participants are now pricing a 75% chance of a rate hike in November. The rate hike is fully priced for February and a second one is expected by December 2018.

The BOE decision comes on the back of macro data about the British economy released on Tuesday and Wednesday, showing inflation at 2.9% approaching five-year high. The unemployment rate fell to 4.3%, the lowest reading in more than 40 years and 20 basis points below the central bank’s estimate of the sustainable long-term level. In spite of the tight labour market, wage growth was stuck to 2.1%. The sluggish growth results in a loss in real terms as consumer prices have increased faster than nominal wages.

Following the hawkish stance of the BOE, the pound climbed to 1.3594 USD and 1.1375 EUR on Friday, the highest levels since the Brexit vote. The yield on two-year UK Gilts, the more sensitive to a shift in monetary policy expectations, closed at 0.474% (0.17% on last week Friday). The benchmark 10-year yield closed at 1.309% after reaching an intraday high of 1.34%, a level not seen since February.

This week the FTSE 100 fell by 2.2% closing at 7215.47 on Friday, declining for four days in a row. The stronger pound explains the sell-off in UK equities. The FTSE 100 typically moves inversely to sterling, as many UK blue chips are multinational businesses that generate substantial earnings overseas.

Next Monday, the BOE governor Mark Carney will give a speech that could provide further guidance about the BOE monetary policy. Retail sales data will be published next Thursday.

Rest of the World

Despite the latest development of the North Korea saga, which saw another ballistic launch over Japan islands on Friday morning, Nikkei 225 index saw its biggest weekly gain in ten months (+3.29%) as a stronger dollar (+2.79% against the Yen) boosted exporters’ shares. The Topix closed 2.85% higher than the previous Friday, after reaching a two-year high of 1,642.56 intraday on Thursday.

The Shanghai Composite Index closed slightly lower at 3353 (-0.35% on a weekly basis), on signs that the economy is cooling again. On Wednesday, data of August of three key indicators gave disappointing results. These are the industrial output, which rose 6.0% YoY, (versus a projection of 6.6% and July’s results of 6.4%), retail sales, which increased by 10.1% (against expectations of 10.5% and 10.4% for July) and fixed investments in urban areas, that rose 7.8% from the beginning of the year, compared to a forecast of 8.2%.

Gold futures fell to $1317, falling by 2.13% compared to the previous week. Oil prices, on the contrary, rose by 4.95% for the WTI and 3.22% for the Brent, at $49.83 and $55.51 a barrel respectively. This important gain, the highest on a week since July, is mainly due to good forecast for demand in 2018.

We believe is worth mentioning what happened to an asset class which has shown incredible returns during the past months: cryptocurrencies. Bitcoin highest trading price on Saturday 9th was $4308.8, and touched a lowest value of $2946.6 on Friday 15th, with a total loss of 31.6% before rebounding to above $3500. This heavy loss was mirrored by declines and a higher-than-usual volatility for other cryptocurrencies as well, among which Ethereum. Two main events happened this week to explain the crash. First, on Tuesday Jamie Dimon, Chairman and CEO of JPMorgan Chase, declared that he considered Bitcoin no less than a fraud, adding that “it is worse than tulips bulbs”, referring to the famous bubble that burst in the 1600s. The second, and perhaps more relevant, event was the announcement that China will shut down bitcoin trading, with the three biggest exchanges announcing that they will stop operations in the following weeks. This follows the ban that Chinese government imposed last week on initial coin offerings (ICO), defining them a criminal activity.

Next week main events include the announcements of Chinese house price index for August on Monday 18th, Japan Balance of Trade for August on Wednesday 20th, as well as BoJ interest rate decision on Thursday 21st.


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