Hey folks, in this holiday shortened trading week we saw a bit of downside chop in price action. Get my take on this week’s weekly round-up.
WEEKLY SOUND BITES:
US indexes closed lower over the holiday-shortened week as some positive economic signals drove an increase in interest rates. A decline in Apple, the most heavily weighted stock in the S&P 500, drove part of the declines after news that Chinese government employees would no longer be able to use iPhones.
The week’s economic calendar, while not especially heavy, seemed to drive sentiment by generally surprising on the upside. The standout appeared to be the Institute for Supply Management’s report on August services sector activity, which jumped unexpectedly to its highest level since February. Meanwhile, Thursday’s weekly jobless claims report came in lower than expected, indicating continued strength in labor demand despite August’s solid increase in the unemployment rate (from 3.5% to 3.8%).
The jobless numbers sparked a rise in short-term bond yields, according to our traders, with the yield on the two-year U.S. Treasury note briefly crossing back above the 5% threshold on Thursday afternoon. Even though the odds of a Fed Rate hike this Sept 20th moved up a little the consensus is for the FEDs to leave the current rates at 5.25%-5.50% levels.
A string of economic data provided more signals that the eurozone economy continues to stumble. Gross domestic product (GDP) in the bloc grew 0.1% in the second quarter, as a drop in exports contributed to Eurostat’s downward revision. A deepening slowdown in Germany was weighing heavily on sentiment. German industrial production in July fell for a third month running, by a greater-than-expected 0.8% sequentially. The decline was driven by a 9% drop in auto manufacturing. Bank of England (BoE) Governor Andrew Bailey cast doubt on a possible hike in UK interest rates at the upcoming September 21 policy meeting.
In Japan, some weak economic data releases suggested that their economy was not doing as well as previously thought, with a downward revision to second-quarter economic growth weighing on sentiment. Japan’s second-quarter 2023 gross domestic product expanded 4.8% quarter on quarter on an annualized basis, weaker than preliminary estimates of 6.0% growth. Meanwhile, the yen weakened to around JPY 147 against the U.S. dollar, its lowest level in over 10 months, from about JPY 146 at the end of the previous week, prompting Japan’s Ministry of Finance to issue its strongest warnings to date on foreign exchange market intervention to prop up the yen.
In China, stocks retreated as the latest economic indicators reinforced concerns about the country’s weakening outlook. The private Caixin/S&P Global survey of services activity fell to a below forecast 51.8 in August from July’s 54.1. On the trade front, China’s exports fell 8.8% in August from a year earlier, softening from the sharp 14.5% drop in July. Imports shrank by 7.3%. And finally, China’s currency fell to a record low of 7.36 against the U.S. dollar in overseas trading after the central bank set its yuan fixing rate at a two-month low. The exchange rate fell below the psychologically important level of 7.35 and close to the weakest since the inception of the offshore market in 2010.
Enjoy this week’s round-up;
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