Asian markets had a very poor week, especially Chinese markets, where investor sentiment turned strongly negative following news from the U.S. that the White House was looking into tariffs on another $200 billion in Chinese goods, and as Chinese economic growth continues slowing. By the end of the week the Shanghai Composite had a loss of 4.6% as it fell sharply in the final three sessions of the week. The Hang Seng in Hong Kong was also lower by 4.0% for the week – its worst weekly performance in six months. Other Asian markets saw smaller losses, with Australia’s S&P/ASX 200 down 1% for the week, while the Nikkei in Japan fell 0.8% and South Korea’s Kospi was 0.3% lower.
The coming week will almost certainly see more weakness from Chinese equities, where officials tried unsuccessfully to reassure investors on Friday. Australian shares could also see weakness based off the Chinese weakness, although it’s likely to be less. South Korea got a boost late last week from a rally in technology, especially shares of Apple suppliers, but that almost surely won’t extend into the coming week. The possible bright spot in the region could be Japan, where investors aren’t very concerned with the potential U.S. – China trade war, and the increasing strength of the U.S. dollar is a boost to Japanese equities.
European markets rebounded on Friday, rising for the first time in three sessions, as a rally in technology helped lift the broader markets despite weaker than expected retail sales in the EU and services PMI in the U.K. The strong Friday wasn’t enough to pull markets into positive territory on a weekly basis though. The pan-European Stoxx Europe 600 had a weekly loss of 0.7%, which was its first weekly loss in five weeks. Germany’s DAX underperformed as it lost 1.9% on a weekly basis, and the CAC 40 in France was 0.6% lower for the week. London’s FTSE was also 0.6% lower for the week as it posted a weekly loss for the first time since the period ending June 29.
The coming week could still see European indices under pressure as investors remain wary of increased trade tensions between the U.S. and China. Germany is especially vulnerable to trade worries, as its export-reliant economy would suffer the most in a trade war. Friday also had signs of weakness for inflation in the Eurozone, which will cast doubts over the inflation target of the European Central Bank. British markets are also fragile, after Bank of England Governor Mark Carney warned that the U.K. might leave the EU with no transition plan, which could be detrimental to the economy.
U.S. markets were the best performing global markets of the week, posting gains across the boar,d as most of the week was positive for equities, despite the news from the White House of possible additional tariffs on Chinese imports. By the end of the week the Nasdaq had gained 1%, while the S&P 500 was up 0.8%. The Dow Industrials were flat, but did manage a slight weekly gain of 0.05%. The rally in Apple shares and related technology shares following the tech giant’s reaching a $1 trillion market cap can be credited with the end of the week rally that gave U.S. markets their weekly gain.
The coming week is likely to remain mostly positive for markets as earnings season begins winding down. Earnings this quarter have been positive, and next week shouldn’t see any change in that trend. The only potential trouble for markets will come towards the end of the week, with PPI and CPI data being released on Thursday and Friday respectively. That said, data in general has been so strong recently that even a poor reading on either PPI or CPI is unlikely to affect markets strongly as investors are already convinced that there will be two more rate hikes this year, and one data point isn’t going to change that.
Gold ended lower for a fourth consecutive week, falling 0.8% on a weekly basis as the stronger U.S. dollar continues pressuring gold, keeping it near one-year lows. In order for gold to find any long-term traction, the dollar needs to relax, shorts need to cover, open interest needs to rise; and if you sprinkle a little recession fear on top, you get a perfect recipe for a longer-term bull market in the yellow metal.
Crude remained under pressure, with West Texas Intermediate crude booking a 0.3% loss, while Brent crude fell 2.1% for the week. Both contracts saw their fourth weekly loss out of the past five sessions. The persistent weakness for crude is due to data showing global crude production rising. This has traders concerned that the glut of global crude will return, and that would send prices back to lows below $40 a barrel.
|All Day||AUD||Bank Holiday|
|07:00||EUR||German Factory Orders m/m|
|09:30||EUR||Sentix Investor Confidence|
|All Day||CAD||Bank Holiday|
|00:30||JPY||Household Spending y/y|
|05:30||AUD||RBA Rate Statement|
|07:00||EUR||German Industrial Production m/m|
|08:30||GBP||Halifax HPI m/m|
|15:00||USD||JOLTS Job Openings|
|20:00||USD||Consumer Credit m/m|
|00:50||JPY||BOJ Summary of Opinions|
|04:05||AUD||RBA Gov Lowe Speaks|
|15:00||USD||Crude Oil Inventories|
|22:00||NZD||Official Cash Rate|
|22:00||NZD||RBNZ Monetary Policy Statement|
|22:00||NZD||RBNZ Rate Statement|
|23:00||NZD||RBNZ Press Conference|
|09:00||EUR||ECB Economic Bulletin|
|13:30||USD||Core PPI m/m|
|00:50||JPY||Prelim GDP q/q|
|02:30||AUD||RBA Monetary Policy Statement|
|09:30||GBP||Manufacturing Production m/m|
|09:30||GBP||Prelim GDP q/q|
|09:30||GBP||Goods Trade Balance|
|09:30||GBP||Prelim Business Investment q/q|
|13:30||USD||Core CPI m/m|
|19:00||USD||Federal Budget Balance|