Asian markets finished the week with strength, and had solid performances across the region as trade worries continued to fade increasingly into the background throughout the week. Mainland China’s Shanghai Composite surged higher by 2.5% on Friday, giving it a 4.3% weekly gain, its best percentage weekly rise since March 2016. Hong Kong also put in a good week, rising in four consecutive sessions for a weekly gain of 2.5%. In Japan, a weaker Yen has helped the Nikkei gain in six consecutive sessions, and post a weekly gain of 3.4%. South Korea’s Kospi was up 2.2% ahead of a week-long holiday, while Australia’s S&P/ASX 200 managed a small 0.5% weekly gain.
The coming week sees several Asian markets closed for holidays and the week will certainly get off to a slow, muted start. The current atmosphere is one in which investors are trying not to let the trade issues between the U.S. and China affect their sentiment, and last week that was successful; but it doesn’t mean it will be successful in the coming week. There’s always the chance of some inflammatory statement from the U.S. or China sending markets sharply lower, so caution will remain as investors try to remain upbeat.
European markets had a very solid week, with the broad based Stoxx Europe 600 index booking a six-session winning streak, while the CAC 40 in France and DAX in Germany each racked up four session winning streaks. By the close of trade on Friday the Stoxx Europe 600 was 1.7% higher on a weekly basis, which was the best weekly percentage gain for the index since the first week of March. Germany’s DAX added 2.5% for the week, while the CAC 40 in France outperformed with a weekly gain of 2.7%. The FTSE 100 in the U.K. matched that 2.7% weekly rise, primarily due to a 1.7% gain on Friday ,when the Pound plunged against the U.S. dollar.
The coming week will more than likely see more gains for European indices, which have been in a gaining streak as investors slowly put aside their concerns over the trade tariffs that the U.S. and China have been inflicting on one another. The French index continues to outperform, but Germany’s DAX has seen improved performance in response to the lowered trade concerns. The FTSE in London will depend on news from the Brexit negotiations to set its direction. The surge higher this past Friday was a direct result of a lack of progress on the Brexit front, and the plunging Pound as a result. The coming week will almost certainly see the FTSE trade around Brexit news and the strength/weakness of the Pound.
U.S. markets got off to a weak start the past week, but mostly recovered for solid gains. That wasn’t entirely true however, with falling technology shares weighing on the Nasdaq. By the close Friday the S&P 500 was 0.8% higher for the week, while the Dow Industrials gained a very respectable 2.2%. The Nasdaq was a laggard for certain, giving back a gain on Friday and posting a 0.3% weekly loss. For the month of September, with just one week of trading left, the Dow and S&P 500 are set to have substantial monthly gains. The Nasdaq is a laggard in this respect as well as it is currently looking at a loss of 1.5% for the month of September.
The coming week could be a struggle for U.S. equities. While traders have shown a lack of concern with the trade issues between the U.S. and China, the technology sector has been struggling throughout September. The stronger U.S. dollar isn’t favorable for equities, nor are the rising bond yields. And the expected interest rate hike from the Federal Reserve this coming Wednesday could have a negative impact on stocks as well since it increases borrowing costs for companies.
Gold managed to eke out a small gain of less than 0.1% this past week as the U.S. dollar strengthened on the final session of the week, causing gold to give back nearly 0.8% in gains made earlier in the week. That was a one-week low for gold, and it held just $1.30 above the key $1,200 level. The coming week could see that level break to the downside, however, as traders will be looking ahead to the Wednesday meeting of the Federal Reserve, which is expected to bring an interest rate hike. Higher interest rates not only strengthen the dollar, which is bad for gold: they’re bad for gold, since gold has no yield.
Crude was higher for the week, especially the U.S. contract, as expectations for rising demand combined with a fifth consecutive week of falling U.S. inventory levels to boost West Texas Intermediate crude over $70 a barrel with a 2.6% weekly gain. Brent crude remains slightly below the $80 handle as it gained a more modest 0.9% for the week. The coming week will kick off with traders responding to the results of a weekend meeting of OPEC and other key oil producing nations. This could easily set the tone for the week. There are already expectations for OPEC to raise production levels to offset coming supply disruptions from Iran.
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