Weekly Market Review - September 16-20
While investors hoped for relief in Sino-US trade tensions amid renewed negotiations between the two parties, the geopolitical situation has become even worse after a Saudi Arabian oil facility was hit by drones. The relations between the US, Saudi Arabia and Iran have worsened.
As of late Friday, global stock markets were higher, fueled by geopolitical tensions and the Fed’s hesitation to point to more interest rate cuts.
The return of the US 10-year Treasury note fell eight basis points to 1.78%.
In the commodity market, the price of a barrel of WTI crude oil increased $3.50 after the incident in Saudi Arabia but eventually declined to show a 1% weekly gain.
In the forex market, the US dollar has lost strength after the Fed cut interest rates but hesitated to announce more easing in the near future.
Bitcoin declined below the $10,000 as it couldn’t break a strong resistance line formed by a descending triangle pattern.
Fed Cuts Interest Rates Again
The US Fed’s Federal Open Market Committee (FOMC) cut its interest rates for the second time since the financial crisis in 2008. The move is meant to support the economy, which has been struggling with the effects of the trade war with China. Nevertheless, the Fed hinted that it wouldn’t hurry with more reductions, which sparked criticism from Donald Trump. The central bank cut the lending rate to a range of 1.75% to 2.00%. The Fed’s decision was in line with expectations.
US Jobless Claims Rose Less Than Expected
The number of US citizens first time applying for unemployment benefits rose last week ended September 14. On Thursday, the US Labor Department said that the jobless claims rose 2,000 to 208,000, while the analysts surveyed by Reuters expected a reading at 213,000. The relatively stable labour market should support US economic growth. Data for the previous week was revised upward by 2,000. The four-week moving average, a more accurate measure, fell 750 to 212,250 last week.
BoE Didn’t Touch The Interest Rates
The Bank of England (BoE) left its interest rate unchanged on Thursday. The central bank cited the need for further clarity on the UK’s readiness for Brexit and left the lending rate at 0.75%. The move was in line with analysts’ expectations. If the uncertainty around Brexit carries on, the inflation might be under pressure, the bank said. American bank JPMorgan said that it was unlikely that Prime Minister Boris Johnson would reach a Brexit deal at the EU summit on October 17-18.
UK Prices Show Modest Growth
The UK inflation increased in August at the slowest pace since December 2016. On Wednesday, the Office for National Statistics (ONS) announced that consumer prices rose 1.7% last month year-on-year after a 2.1% growth in July. Economists surveyed by Reuters anticipated a reading at 1.9%. The slowing inflation might encourage households, whose benefit from higher wages and whose spending has supported the British economy. Separately, the ONS said that UK house prices increased in July by only 0.7% year-on-year, the slowest growth rate since 2012.
Japanese Exports Remain in Negative Territory
Japan’s exports fell for the ninth month in a row in August amid Sino-US trade tensions. Nevertheless, the drop was smaller than anticipated. On Wednesday, the Ministry of Finance said that exports had declined by 8.2% in August compared to the same period in 2018. The worst performers were the exports of cars, auto parts, and semiconductor production equipment. Analysts expected a 10.9% drop. The decline in exports puts pressure on the central bank to increase stimulus measures.
Economic Sentiment in Germany Beat Expectations
German investor sentiment beat expectations in September, according to a survey carried out by the ZEW institute. Thus, economic sentiment in Europe’s largest economy rose to -22.5 from -44.1 in August. Economists surveyed by Reuters anticipated a slight increase to -37.0. Nevertheless, the ZEW institute said that the outlook for Germany remained negative given the Brexit uncertainty and the US-China trade conflict.
Upcoming News to Watch
On Monday, the US and the eurozone will publish manufacturing and services purchasing managers indices (PMI), along with the composite PMI readings.
On Tuesday, the Bank of Japan will release its monetary policy meeting minutes. Elsewhere, the US will report on its consumer confidence.
On Thursday, the US will publish its trade balance and the gross domestic product (GDP) performance for the second quarter.
The week will end with several important economic updates. Thus, Japan and France will report on their consumer price indices, while the US will publish data on durable goods orders and personal income and spending.
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.