The Weekly Update

US 10-year Treasuries gave back 6 basis points last week, following the 52 basis point rally in August, as equity markets rose on modest consumer data, talk of concessions in Hong Kong and further materialisation of central bank policy easing expectations. The S&P 500 was up 1.8% despite the week starting with the introduction of new consumer-focused tariffs from both the US and China. And although the US managed to maintain a marginally positive PMI reading (with now 75% of developed nations’ latest readings under 50) the latest US ISM undershot significantly, at 49.1, signalling further weakness in the cycle. The Fed’s public Beige Book also highlighted “manufacturing headwinds” but signalled just enough pace of economic growth and household spending to bolster markets. Lastly, the week closed with non-farm payrolls showing only 130,000 jobs added last month, 30k below forecasts; but again markets held steady to maintain a second consecutive weekly gain.

This side of the Atlantic Ocean, sterling gained over 1% as the Brexit car crash seems to have crushed PM Boris Johnson’s chances of a definitive no-deal Brexit at the end of October. A cross-party “Rebel Alliance” won a vote that should force the Government to seek a delay to Brexit, unless a Withdrawal Agreement with the EU has been signed by the end of October. Johnson’s subsequent hopes – that the opposition leader would support an immediate early general election to quash the new Benn Bill before it got Royal Assent – were soon dashed as Corbin confirmed he would not capitulate. However, voices throughout Europe, including French Minister Amelie de Montchalin and Foreign Minister Jean-Yves Le Drian, were quick to warn that – as things stand – the EU should refuse a further extension. As ever, another week closer and another week further from a Brexit resolution.

The week ahead starts with UK GDP and German trade balance on Monday, followed by China CPI and Australian business confidence on Tuesday. On Wednesday the US release PPI data and Australia publish their latest consumer confidence figures. Then Thursday sees US and Germany CPI data along with the ECB decision on possible further easing – the key highlight of this week’s economic calendar. The week finishes up with US retails sales and Michigan consumer confidence on Friday.

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