Hey Folks, can you hear the clock ticking? It is getting louder and the markets are beginning to hear it as well. Get me take on the market action below in this week’s round-up;
WEEKLY SOUND BITES;
- The major benchmarks moderated their losses for the week with this past Friday’s move higher, but the large-cap benchmarks and Nasdaq Composite index recorded their biggest weekly drops since February and rounded out the worst monthly declines (S&P – 4.65% and about flat for the QTR at 0.58%) since the onset of the pandemic. Rising U.S. Treasury yields seemed to overhang sentiment throughout the week, with many investors appearing to view the Federal Reserve’s policy statement the previous week in an increasingly hawkish light. The fiscal policy environment also appeared unsettling with the debt ceiling debate along with infrastructure spending.
- The Commerce Department’s core (less food and energy) personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, rising 3.6% over the 12 months ending in August, matching consensus. Inflation concerns seemed to be growing among consumers, as well. Growth in durable goods orders for August exceeded expectations, and pending home sales jumped unexpectedly.
- The yield on the benchmark 10-year U.S. Treasury note spiked to a three-month high at midweek before falling back to end the week roughly where it started. Negative headlines about energy prices, Chinese property developer Evergrande, and gridlock in Washington weighed on investor sentiment and drove yields lower toward the end of the trading week.
- On a year-over-year basis, eurozone consumer prices jumped 3.4% in August—up from 3% a month earlier and the highest level since September 2008. ECB President Christine “Queen Bee” Lagarde acknowledged in testimony to the European Parliament that inflation in the eurozone could exceed the central bank’s forecasts, which have already been raised twice this year. Meanwhile Bank of England (BoE) Governor Andrew Bailey said that UK GDP probably won’t recover to pre-pandemic levels until early next year.
- In Japan, Kishida is seen being elected as Prime Minister, is viewed as a consensus builder who will continue to push forward with the structural reform agenda introduced by Suga. In terms of fiscal policy, he has mentioned the need for additional support for the economy, although he has provided few details but is viewed Dovish on Fiscal Policy, along with the BoJ Governor Kuroda.
- IN China, positive news concerning indebted property developer China Evergrande Group supported investor sentiment. Mid-week, Evergrande said that one of its units would sell roughly 20% of its stake in a building project to a state-owned enterprise for USD $1.5 billion to help reduce its debt load. Separately, the People’s Bank of China (PBOC) pledged to ensure a “healthy property market” and to protect homebuyers’ rights in a statement following the central bank’s quarterly monetary policy committee meeting.
Enjoy This Week’s Round-Up
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