The tussle between Madrid and Catalonia dominated news this week. Following various ultimatums, both sides seemed to be moving towards a conflict. Carles Puigdemont refused to clearly declare independence but said he would if Madrid withdrew the region’s autonomous status and imposed direct rule. Mariano Rajoy’s...
Equity market trading was thin amid fresh low-volatility records. And yet global news flow was substantial and included the threat of Spain disintegrating, more noise and fury over North Korea, Turkish troops moving into Syria and Washington’s decision to question the US agreement with Iran over nuclear developments....
This week’s headline event was the political crisis following the Catalan referendum. Following violence during the vote and then the Spanish king’s uncompromising television address, all eyes turned to the separatists. The big question is whether they will go ahead and proclaim independence.
Volatility remained under control despite mixed election results in Germany, the dissolution of Japan’s lower chamber, comments from Janet Yellen and Mario Draghi, persistently high geopolitical tensions and the US tax reform project. Only emerging markets were hit this week by US dollar strength and higher US rates....
PMI data suggest global economic growth is still strong.
Since the beginning of September, the balance has clearly shifted in favour of equities and away from government bonds.
This week’s economic data provided confirmation that the synchronised global recovery was doing well but it was the ECB’s monetary committee meeting that dominated news. The press conference held no big surprises but delivered more detail.
Jackson Hole left investors none the wiser. They were expecting clues on the Fed’s tightening trajectory but Janet Yellen instead focused on threats from deregulation while Mario Draghi waxed philosophically on the risk of mounting protectionism.
Equity markets stabilised, adopting a wait-and-see attitude before investors return from holiday to face a period with numerous political and economic events. The Jackson Hole Symposium will see central bankers tackling the monetary policy issue.
The week got off to a good start and markets rebounded as tensions between the US and North Korea abated. But the mood only lasted 3 days and it was the US once again that was responsible for worries resurfacing.
Tension between the US and North Korea escalated, sending volatility higher and investors into safe haven areas like government bonds, gold, the US dollar and also US equities. As often happens, Wall Street loses less than other markets if the problem comes from the US itself.
US equity markets continued to outperform European bourses (in local currency) as the US dollar fell. Given an acceleration in its decline, a technical rebound is possible.
Earnings results and the US dollar’s fall against the euro held centre stage this week.
Central banks, notably the ECB, once again made their mark on market sentiment.
Global markets started the week on the front foot following better-than-expected jobs data in the US.
The Fed and ECB minutes were released over the week. Most central banks have changed their tone. Following on from the Bank of England, the Bank of Canada and the Fed, the ECB also suggested it was moving towards tightening in a few months’ time.
Equity, bond and currency markets had a turbulent week. Oil was the first to suffer with Brent crude falling below USD 45 before rallying to close above USD 47.5. Then it was the turn of US tech stocks to suffer more profit taking.
It was another week of market stabilisation amid low rates and favourable economic momentum. In particular, France’s business climate hit a record level not seen since November 2011 with a sharp upturn in construction and retail trends.
All eyes focused on central bank meetings: the US, Canada, the UK and Japan. Only the ECB (the week before) and BoJ stuck to the same message.
Valuations are starting to look a little stretched but the pace of global growth is satisfactory: no signs of overheating but no pointers either suggesting the cycle is about to end so the recovery looks reasonably
sustainable. But despite this marked economic and financial stability, it would be wrong to conclude...