Asian markets got off to a rough start last week, but finished with strength, giving the region broad based gains. The exception was in mainland China, where investors remained cautious, and the Shanghai Composite fell in four out of five sessions to post a weekly loss of 0.8%. Hong Kong’s Hang Seng had a better finished to the week, and after falling into bear market territory early it clawed back at the end of the week for a 1.2% weekly gain. Japan’s Nikkei easily outperformed, rising in four of five sessions to gain 3.5% for the week and finish at a seven month high. In South Korea the Kospi had a respectable weekly gain of 1.6%, while Australia’s S&P/ASX 200 managed a 0.4% gain as it bounced back on Friday.
There’s no doubt the coming week will continue to be dominated by news of the proposed meeting between the U.S. and China to discuss trade. Markets are likely to run with any positive news, but a state-run Chinese newspaper ran an editorial warning that China would not be pressured by the U.S. on Friday. This could mean little progress for trade talks, and disappointment for markets. If things play out this way we would likely see the week begin with strength, but later fall into disarray.
European markets had a fairly good week, as investor sentiment improved following news that the U.S. had approached China to resume trade talks. Indices finished the week on a strong footing, and the broad based Stoxx Europe 600 rose 1% for the week, the CAC 40 in France outperformed with a gain of 1.9%, and the German DAX added 1.4%. The gains were even more impressive as the Euro firmed during the week against the U.S. dollar, which is bearish for equities. London’s FTSE seesawed between gains and losses during the week as Brexit concerns continue to affect the markets, but a strong finish Friday gave the FTSE a 0.4% weekly gain.
While European markets are likely to remain optimistic over the trade talks between China and the U.S., they could also begin to come under pressure from the strengthening Euro and Pound. The FTSE has already seen some weakness due to Pound strength; and while European markets have largely ignored the firming Euro so far, that won’t continue to be the case if the Euro continues climbing higher. That could have us set up for a strong start to the week but a poor finish, unless of course we get good news from the U.S./China trade negotiations.
U.S. markets posted solid gains last week as investors continue to be mostly unfazed by trade issues. The end of the week saw the S&P 500 trading up by 1.2% as it posted five consecutive winning sessions last week. The Dow Industrials were up by 0.9%, rising for four consecutive sessions, and the Nasdaq outperformed with a 1.4% weekly gain, despite rising in just three of the five trading sessions of the week.
The coming week is likely to see U.S. markets continue modestly higher. The trade issue hasn’t had a big impact, and there are no other strong headwinds for equities. While gains going forward might not be outsized, equities are still providing better returns than bonds, and corporate profits have been strong. This theme has kept markets moving higher for some time, and there’s no reason to think that this will change in the coming week.
Gold had a mixed week, but a drop at the end of the week erased most of the gains made earlier and gold ended the week with a $0.70 gain. Still, that wasn’t entirely bad news as it left gold above the psychologically important $1,200 level. While gold had disengaged from the U.S. dollar early last week, by Friday it was trading inversely with the greenback again; so when the U.S. dollar strengthened gold fell. The coming week will almost surely see gold remain in tune with the U.S. dollar. And the trade negotiations and posturing between the U.S. and China will likely have a large impact on the USD, making it hard to determine where gold will end the week.
U.S. West Texas Intermediate Crude posted a 2% weekly gain, and the global benchmark Brent crude wasn’t far behind as it climbed 1.9% for the week. Gains for the U.S. contract were helped by hurricane Florence bearing down on the east coast of the U.S. as traders were anticipating potential supply disruptions. Crude in general benefitted from the upcoming sanctions against Iran. Gains were muted by a report Thursday showing that global crude inventories reached a record in August.
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|Tentative||EUR||German Buba Monthly Report|
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