Weekly Market Review - August 5-9
As of late Friday, global equities are relatively on the same level as they were on Monday, recovering from the Tuesday dip. The markets continue to monitor the Sino-US trade disputes after Trump threatened to impose more tariffs on Chinese goods starting from September. The PBOC responded with a sharp devaluation of Yuan, which caused a steep downtrend in the stock markets on Tuesday.
In the Forex market, the US dollar has been among the worst performers, falling 0.87% against the euro over the week.
In the crypto space, Bitcoin has gained over 12% over the week thanks to its safe haven status. Gold and silver also benefited from the global turmoil, adding over 3.5% each.
Investor Mood in The Eurozone Weakens
Investor sentiment in the eurozone weakened this month to its lowest level since October 2014, according to a survey carried out by Sentix. The report warned that an economic recession in Germany is just around the corner. Sentix said that the investor morale in the 19 countries sharing the euro fell to -13.7 in August from -5.8 in July, while analysts expected a decline to -7.7. The same indicator for Germany also dropped to -13.7, the lowest since August 2009.
US Services Sector Decelerates
Growth in the US services sector slowed last month to its lowest rate in three years amid concerns about business orders and the economy as a whole. On Monday, the Institute for Supply Management (ISM) said that the activity in the services sector declined to 53.7 from 55.1 in June, while economists anticipated an increase to 55.5. The services sector accounts for over 65% of the US gross domestic product (GDP). The ISM’s index on new orders declined to 54.1 in July, the lowest since August 2016.
Australia’s Central Bank Maintains Rate at 1.00%
On Thursday, the Reserve Bank of Australia (RBA) maintained the interest rate at the record low of 1%. The central bank said the rate cuts in June and July were enough for now. However, some economists argue that the RBA should follow the approach of other central banks that implement more aggressive stimulus measures. RBA Governor Philip Lowe admitted that the central bank could do more to boost the economy. Analysts expect the rates to be cut to 0.5% by early next year.
Germany’s Industrial Orders Beat Expectations
German industrial orders increased more than expected in June. However, the boost was mainly driven by a surge in bookings for big-ticket items (like houses and cars). The economy ministry said that Germany’s economy hadn’t shown any clear signs of improvement yet. Contracts for German goods increased by 2.5% compared to May, which is the biggest expansion since August 2017. Analysts polled by Reuters expected an increase of 0.5%.
Germany’s Industrial Production Declines More Than Anticipated
While industrial orders rose more than anticipated, German industrial production fell short of expectations in June. On Wednesday, the Statistics Office said that industrial output fell 1.5% compared to May, way worse than economists’ predictions of a 0.4% decline. The recession in the manufacturing sector, which accounts for a fight of Germany’s economy, is caused by the ongoing trade disputes between the US and China, both counties being export destinations for German goods. In the second quarter as a whole, industrial output declined 1.8% over the quarter.
US Core PPI Unexpectedly Drop
The US core producer prices index (PPI) surprisingly declined last month, marking the first drop in two years. The decline in inflation might force the Federal Reserve to consider further easing. On Friday, the Labor Department said that core PPI, which excludes food and energy prices, declined by 0.1% compared to June, while analysts expected a 0.1% increase. The overall PPI index expanded 0.2% from June, in line with the expectations.
Upcoming News to Watch
Next week, several countries will release inflation data, including Germany, Spain, the US (on Tuesday), France, and the UK (on Wednesday).
Singapore, Germany, and Hong Kong will report on their economic growth on Monday, Wednesday, and Friday, respectively. The eurozone will also release its GDP data on Wednesday.
On Monday, markets in Singapore, Japan, and India will be closed in observance of Hari Raya Haji, Mountain Day, and Eid al-Adha, respectively. On Thursday, markets in South Korea, Italy, and India will be closed for Liberation Day, Assumption Day, and Independence Day, respectively.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets. Learn more.