Weekly Market Update 12/09/16

Market Update


This document is intended for professional advisers only and should not be relied upon by any persons who do not have professional experience in matters relating to investments.

Weekly Market Update for 12th September

Index  Week Ytd
FTSE 1006777-1.71%-1.68%8.56%12.10%
S&P 500 USD2128-2.39%-2.36%4.10%5.71%
NASDAQ COMP USD5126-2.36%-2.35%2.37%3.29%
EURO STOXX 50 EUR3053-0.86%-0.86%-6.56%-4.14%
NIKKEI 225 YEN169660.24%0.24%-10.86%-9.90%
HANG SENG CNY241003.58%3.73%9.97%13.74%
MSCI EMERGING MKTS USD9091.08%1.12%14.50%16.68%
FTSE WMA Income2897-1.19%-1.16%8.66%11.40%
FTSE WMA Balanced3856-1.10%-1.07%9.23%11.92%
FTSE WMA Growth4460-1.06%-1.03%9.66%12.40%
GOLD USD13280.20%25.14%
WTI USD463.24%23.87%


Notable events over the last week

The ECB disappoints markets with unchanged policy

The European Central Bank disappointed markets last week by maintaining official rates and providing no extension to the quantitative easing campaign, defying market expectations. Perhaps more significantly, ECB president Mario Draghi stated there was no need for extra stimulus “for the time being”, specifically highlighting the resilient Euro. Despite this, Draghi stressed the need for fiscal and structural measures to tackle weak trend growth. The ECB cut its 2017 economic growth forecast to 1.6% from 1.7%, following the release of the disappointing Q2 GDP growth of just 0.3%, although the 2018 projections remained unchanged. Following the announcement global sovereign yields rose and the euro strengthened, although German Bunds rallied.

UK services PMI survey rebounds after an underwhelming July

The UK services sector rebounded sharply in August as headline activity rose to 52.9 from 47.4 in July, significantly above consensus of 50, the level indicative of economic expansion. This post-Brexit recovery marks the largest monthly increase in the history of the survey and follows the rebounds in the manufacturing and construction surveys seen previously. Although the reading is certainly positive for the UK economy it is likely a correction from the overly pessimistic and disappointing July reading and therefore should not be evaluated in isolation. The pound soared to a seven-week high against the dollar on the news, rising to $1.34/£.

UK manufacturing slumps for the third month in a row according to ONS

UK manufacturing output slumped 0.9% (vs. -0.3% expected) in July after a 0.2% fall in June according to the Office of National Statistics. On an annual basis, manufacturing output climbed 0.8% in July and the wider measure of industrial production rose by 0.1% month-on-month (MoM) in July and by 2.1% year-on-year (YoY). Overall, weaker July manufacturing numbers may cast doubt over the positive picture painted by recent surveys. However, it’s important to note the volatility of monthly data, particularly in the manufacturing sector as exemplified by the manufacturing PMI slumping to its lowest level since 2013 in July and then subsequently rebounding sharply to its highest level since October in August.

European retail sales proved strong for July

Eurostat data showed the seasonally adjusted volume of retail trade for the Euro area was up +1.1% MoM in July (vs. +0.5% expected). The rise in overall trade was due to an increase of 1.8% for automotive fuel, 1.1% for Food, drinks and tobacco and 0.4% for non-food products. Luxembourg, Portugal and Germany recorded the highest increases in retail trade, whilst volumes in Slovakia, Sweden and Denmark decreased the most over the month.

US non-manufacturing ISM declines sharply

The US non-manufacturing index registered 51.4 in August, decreasing substantially from 55.5 in July. The reading indicates that activity in the non-manufacturing sector of the economy is still growing, however the reading was well below market expectations and the weakest showing since February 2010. Last week’s downbeat ISM manufacturing data followed by this week’s slump in the non-manufacturing survey casts some doubt over the strength of US growth for the latter half of the year, possibly lessening the chances of a September rate hike from the Fed.

Carney confident the Bank of England have the tools to make Brexit a success

In his report to the Treasury Committee on Wednesday, Mark Carney challenged allegations that the Bank of England (BoE) had over egged warnings in advance of Brexit and then subsequently over reacted with policy decisions in August to justify them. Whilst acknowledging recent data has been encouraging, Mr Carney maintained that the package of monetary easing measures put in place by the BoE in August was necessary to reduce the risk of recession. The Bank of England still project a slowing in the UK economy and Mark Carney signalled they are prepared to ease financial conditions further if needed to help make leaving the EU a success. When questioned whether the committee was running out of ammunition to stimulate the economy, Mr. Carney retorted that they have tools remaining, in particular the capacity to increase the scope of all of the tools introduced in August.

Coming up this week (Source Bloomberg)

DayData ReleaseConsensusPrior
MondayJapan Machine Orders MoM Jul-2.90%8.30%
 Japan PPI YoY Aug-3.40%-3.90%
TuesdayUnited Kingdom CPI YoY Aug0.70%0.60%
 United Kingdom CPI MoM Aug0.40%-0.10%
 United Kingdom CPI Core YoY Aug1.40%1.30%
 United Kingdom PPI Output NSA MoM Aug0.30%0.30%
 United Kingdom PPI Output NSA YoY Aug1.00%0.30%
 China Industrial Production YoY Aug6.20%6.00%
WednesdayJapan Industrial Production MoM Jul F0.00%
 United Kingdom Jobless Claims Change Aug1.8k-8.6k
 United States MBA Mortgage Applications Sep0.90%
 United Kingdom ILO Unemployment Rate 3Mths Jul4.90%4.90%
 United Kingdom Claimant Count Rate Aug2.20%2.20%
Thursday United States Initial Jobless Claims Sep265k259k
 Eurozone CPI YoY Aug F0.20%
 United Kingdom Bank of England Bank Rate and Meeting0.25%0.25%
 United States Retail Sales Advance MoM Aug-0.10%0.00%
 United States Industrial Production MoM Aug-0.20%0.70%
 United States PPI Final Demand MoM Aug0.10%-0.40%
 Eurozone CPI MoM Aug0.10%-0.60%
 United States Empire Manufacturing Sep-1.0-4.2
FridayUnited States CPI MoM Aug0.10%0.00%
 United States U. of Mich. Sentiment Sep P90.689.8

The information in this document does not constitute advice or a recommendation and investment decisions should not be made on the basis of it.