Weekly Market Review - August 26-30
This week has been dominated by the G7 summit in France and the situation around the US-China trade war. Chinese representatives hinted that Asia’s largest economy was ready to solve the trade conflict in a calm manner, which boosted the US stock markets and the dollar.
The US dollar has been by far the best performer of the week, adding 0.91% against euro, 0.58% against the British pound, and 0.69% against Japanese Yen.
In the commodities market, gold and silver were little changed during the week, as investors are waiting for a clear direction of the trade war and the Brexit deal.
Bitcoin suddenly fell over 9% from Wednesday to Thursday, losing 7% over the week.
US Household Spending Beat Expectations
US consumer spending noted a decent increase last month as households purchased several categories of goods and services. On Friday, the US Commerce Department announced that consumer spending rose 0.6% in July after 0.3% growth in June. Analysts, on average, expected an increase of 0.5%. It’s worth mentioning that consumer spending accounts for over 67% of the US economic activity, so the July performance eased the intensity of fears of a recession.
Brazil’s Unemployment Supports Hopes For Economic Growth
The unemployment rate in Brazil declined below analysts’ expectations and the lowest this year in the three months through July. On Friday, national statistics agency IBGE said that unemployment fell to 11.8% in the second quarter of the fiscal year 2019, which gives hopes of acceleration of economic growth. In fact, the indicator was published a day after investors found out that Brazil’s GDP accelerated twice as fast as economists anticipated.
No-Deal Brexit Might Hit UK Bank’s Earnings by 25%
British banks might see their earnings slashed by 25% if the UK leaves the European Union (EU) without a deal, Citigroup concluded in a research document. On Thursday, Citigroup analysts estimated that a no-deal Brexit, along with lower interest rates and loan defaults, would hit banks’ earnings by a figure between 15% and 25%. The negative scenario might have a more muted impact on major banking giants like Barclays, Lloyds, HSBC, Standard Chartered, and the Royal Bank of Scotland. The reason is that the Brexit-related risks are already priced in their share quotes.
Hong Kong’s Retail Sales Hit by Protests
Retail sales in Hong Kong tumbled by the most in about three years amid anti-government mass demonstrations. On Friday, the government said that retail sales declined by 11.4% in July compared to the same period in 2018. The protests hit consumer sentiment and hurt tourism. The demonstrations in the city started in June because of an extradition bill that would have permitted arrested people to be sent to China. Hong Kong’s retail sales fell in July for the sixth month in a row.
US Jobless Claims in Line With Expectations
The number of American citizens applying for unemployment benefits slightly increased, matching analysts’ expectations. The change in initial claims suggests a robust labour market despite fears of an economic recession. On Thursday, the US Labor Department said that initial applications for unemployment benefits rose last week by 4,000 to 215,000. Data for the previous was revised upward by 2,000 applications. The four-week moving average fell 500 to 214,500 in the week ended August 24.
German Unemployment Puts Pressure on EU’s Largest Economy
Germany’s unemployment rate remains unchanged at 5% in August, though the number of unemployed rose 4,000 to 2.29 million. The labour market of Europe’s largest economy seems to be negatively impacted by weakened manufacturing sector, which might force the European Central Bank to consider aggressive stimulus measures. This is the fourth straight month when the number of unemployment fails to decrease.
Upcoming News to Watch
Next week, US and Canadian markets will be closed on Monday in observance of the Labor Day, while Indian markets will be closed on Ganesh Chaturthi. Elsewhere, Germany, the UK, and the eurozone will release the purchasing managers’ index (PMI) in the manufacturing sector. The US will publish similar data the next day.
On Tuesday, the Reserve Bank of Australia (RBA) will announce its interest rate decision. Later on the same day, Australia will report on its gross domestic product (GDP) performance in the second quarter.
On Wednesday, the Bank of Canada will present its interest rate decision, with analysts expecting no change.
The week will end with the long-awaited US nonfarm payrolls report, which will shake the US dollar. Elsewhere, the eurozone will report on its GDP performance.
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.