The Weekly Update

Last week saw a fair amount of central bank news and data releases, with most as expected and all having relatively little impact on the markets on the whole. US 10-year Treasuries started and ended the week yielding 2.95% with the dollar slightly stronger by half-a-percent – with the DXY Index rising from 94.67 to 95.15. Trump on the other hand managed to continue to stir-up markets threatening to shut down the government save for the backing of his immigration proposals, and to raise tariffs against China to 20-25% across the board. Last week will also be remembered as the first time a company was valued at $1 trillion: as Apple beat Amazon, Google and Microsoft to the milestone.

As expected the Fed left the target range unchanged at 1.75-2%. The main changes to the statement were an upgrade to the growth outlook stating ‘economic activity has been rising at a strong rate’ when the previous statement had talked of a ‘solid rate’. The market is looking for another 25 basis point increase at the 25-26 September meeting. On Friday US Nonfarm Payrolls rose 157k slightly below the 193k expectation with average hourly earnings growth holding at 2.7% yoy. Contrastingly the Bank of England raised rates 25bps as broadly (though far from certainly) anticipated pushing the UK base rate above half-a-percent for the first time in almost a decade; this quelled sterling 4-months of depreciation… for a total of around 3 hours. Market will now be watching this Friday’s UK GDP, expecting its strength to vindicate the BoE’s move.

This week started with a mixed session in Asia followed with European stocks opening down, in part reflecting German factory orders posting a 4% decline for last month – in the face of tariff threats and automakers’ tentative outlook. Tomorrow’s German Industrial Production figures may highlight the same concerns. Emerging Market volatility looks to continue on an upwards path, and oil likewise following the renewed US sanctions on Iran and a number of sector data and earnings this week. Highlights over the next few days include Japan’s GDP and China trade data with hopes that the former will rebound and the later will shed light on the effects of the $34bn US tariff on goods over the July period. With a slightly busier economic calendar than usual, the week ahead may hold a few more surprises than the usual sleepy sunny summer period.

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