Asian markets had a pretty good week overall, with Chinese indices leading the charge at the beginning of the week, while Japanese shares picked up later in the week and South Korean shares gained steadily throughout the week. The Shanghai Composite on mainland China was the best performing index in the region, gaining 2.3% and erasing half of the loss suffered the previous week. Hong Kong didn’t follow the mainland’s lead on a daily basis, but the Hang Seng still posted a gain of 1.7% for the week. In Japan the Nikkei got off to a slow start, but softness for the Yen mid-week helped lift exporter shares and gave the Nikkei a 1.5% weekly gain. South Korea’s Kospi rose steadily all week, and by Friday the index was up for six consecutive sessions, booking a 2% weekly gain. The worst performance in the region came from Australia, where sinking banking stocks held the S&P/ASX 200 down all week for a loss of 1.5% by Friday.
The coming week might not be as good for Chinese shares, as the trade meeting between the U.S. and China had no results on Friday, and many market watchers aren’t expecting any positive results from the meetings. That would certainly put negative pressure on Chinese markets. Japan on the other hand could have a good week if the Yen remains above the 111.00 level against the U.S. dollar, or possibly even softens further. Australia could do well also, as financial shares should now be somewhat oversold and bargain hunters may be ready to step in.
European markets rose modestly on Friday, holding onto weekly gains and finishing with a winning weekly performance for the first time in four weeks. The optimism from investors came after U.S. Federal Reserve chairman Jerome Powell struck an evenhanded tone at the Jackson Hole summit. For the week the Stoxx Europe 600, the broadest measure of European equities, was up by 0.7%. The DAX in Germany outpaced that gain as it tacked on 1.5% for the week, while the CAC 40 in France outperformed with a 1.6% weekly advance. In the U.K. the FTSE managed a 0.3% gain, despite concerns over the possibility of a “no-deal Brexit” that could cause financial chaos.
The coming week could see equity markets struggle to make gains, as the Euro and Pound continued their trek higher on Friday after a one day break. Germany is particularly vulnerable to a stronger Euro, as its export driven economy has the most to lose when the Euro strengthens. France will likely continue to hold its position as the best performer in the region. The FTSE could also track lower, as investor concerns over the potential for a “no-deal Brexit” and the impact that would have on the U.K. economy have risen lately. We’ll have to wait to see, however, as U.K. markets will remain closed Monday for a public holiday.
U.S. markets suffered some weakness mid-week that held them back from making gains as strong as other global markets. They did finish the week on a strong note, however, with the Nasdaq and S&P 500 both hitting new record high levels on Friday. For the S&P 500 it was the first record close since January, snapping a 145 day streak without a record close. The Dow closed higher Friday, but remains roughly 3% below a record close. For the week, the S&P logged a 0.9% gain, which was a second straight weekly rise. The Nasdaq advanced by 1.7% for the week, while the Dow booked a 0.5% advance.
After Fed chair Jerome Powell said gradual rate hikes from the Fed are the way to go, and that he sees no signs of the economy overheating, markets reacted by heading higher, and that is the tone the week will begin on when traders return on Monday. There are still trade tariff issues outstanding, however, as well as recent potential legal issues for President Trump, so markets aren’t in the clear; but it does seem as though they should be able to make gains in the coming week.
Gold surged higher on Friday, posting its best daily gain since March and finally scoring a weekly gain for the first time in seven weeks. On a weekly basis gold was 2.5% higher, with a weaker U.S. dollar over the past week helping gold climb back above the $1,200 level. The catalyst for the drop in the U.S. dollar was a speech by Federal Reserve chair Jerome Powell, in which he said interest rates are appropriate and that the economy was in no danger of overheating. Analysts are now speculating that gold could see significant upside in the coming weeks, as a weaker U.S. dollar will combine with the huge volume of gold shorts to push prices higher.
Crude markets made solid gains this past week, with a larger than expected drop in U.S. crude inventory levels combining with trader concerns over a potential supply disruption from Iran, which is facing U.S. sanctions. U.S. West Texas Intermediate crude added 5.4% on the week, snapping a seven week streak of weekly losses. Brent crude, the global benchmark, added 6% for the week and rose on a weekly basis for the first time in four weeks. Supply disruption concerns are likely to persist, which will help lift crude prices further. The weaker U.S. dollar is also bullish for crude prices; so, as long as U.S. inventory levels don’t rise unexpectedly we should see even higher crude prices going forward.
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|15:00||USD||Pending Home Sales m/m|
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|07:45||EUR||French Prelim CPI m/m|
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