WEEKLY MARKET RECAP
Your weekly global financial market newsletter
11 September 2023
- Leaders of the G20 nations concluded their summit in India with a consensus document that included discussions on reforms of institutions such as the World Bank and added the African Union as a permanent member to strengthen representation. The G20 took a softer stance on the Ukraine conflict, avoiding direct criticism of Russia while affirming the principle that states should not acquire territory by force. In addition, the United States, India, and Saudi Arabia unveiled plans to establish rail and port connections between the Middle East, South Asia, and Europe, positioning themselves as an alternative to China’s Belt and Road Initiative.
- IMF Chief Kristalina Georgieva emphasised the importance of increasing quota resources for the International Monetary Fund (IMF) by the end of the year and urged G20 members to fulfill their commitment to allocate $100 billion annually for climate finance. Addressing debt vulnerabilities in low and middle-income countries was discussed at the G20 summit in New Delhi without presenting a new action plan. Georgieva called for G20 leadership on climate finance, mobilising domestic resources for green initiatives, and strengthening the global financial safety net.
- A dispute between far-right Republicans and other lawmakers threatens a possible government shutdown in the U.S. on October 1 looms, which would lead to a temporary closure of many government agencies if spending bills are not approved. Shutdowns have occurred 20 times since the 1970s, with the most recent lasting 35 days in late 2018 and early 2019 due to a disagreement over border security. Such shutdowns result in federal employees being furloughed, disruption of services, and potential economic impacts, while essential services such as mail delivery, tax collection, and debt payments continue. A debt limit standoff is different from a shutdown as it revolves around Congress setting a cap on government borrowing, potentially leading to a U.S. debt default with severe financial consequences.
Indices
Stocks ended the shortened week with losses as rising interest rates influenced market dynamics, favouring growth stocks over value shares and large-caps over small-caps, with Apple’s decline due to restrictions on Chinese government employees using iPhones and concerns over iPhone 15 pricing contributing to the downturn, while chipmakers such as NVIDIA also faced declines; in Europe, the STOXX Europe 600 Index fell 0.76% on concerns about a potential economic slowdown due to increased interest rates, with Germany’s DAX down 0.63% and the UK’s FTSE 100 Index gaining 0.18%.
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US30 -0.75% |
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US100 -1.36% |
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US500 -1.29% |
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GER40 -0.63% |
Commodities
The U.S. oil rig count increased by one last week, marking the first increase since June, however, it remains uncertain whether this trend will continue, challenging the argument that a decrease in rigs will lead to a decline in U.S. crude oil production. Oil prices also rose as concerns about supply disruptions from Saudi Arabia and Russia led traders to hedge, despite uncertainty over the global economic outlook and questions about central banks’ interest rate policies. On the other hand, Gold posted a weekly loss as the U.S. dollar strengthened, erasing the previous week’s gains, with uncertainty surrounding the Fed’s monetary policy and inflation data contributing to a stable but cautious trading range for the precious metal.
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Gold -1.03% |
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Silver -5.16% |
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BRENT +1.95% |
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NATGAS -5.40% |
Forex
The U.S. dollar fell slightly in early European trading but is still on track for its eighth consecutive winning week, fueled by U.S. economic strength that has raised questions about possible rate hikes by the Federal Reserve, while the European economies continue to struggle, with the Chinese yuan falling to its lowest level against the dollar since 2008 amid diplomatic tensions and concerns over a slowdown in China’s economy.
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EUR/USD -0.69% |
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USD/JPY +1.08% |
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GBP/USD -0.98% |
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USD/CAD +0.32% |
Crypto
Federal Reserve Vice Chairman for Supervision Michael Barr emphasised that the central bank is far from deciding to issue a digital currency (CBDC) and would only proceed with one if it had clear support from the president and Congress. Barr expressed concern about the operation of stablecoins without adequate oversight and called for a robust legislative and regulatory framework to address potential risks to financial stability, monetary policy, and the U.S. payments system. Fed Chairman Jerome Powell has also stressed that explicit approval from Congress is required before considering issuing a CBDC.
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BTC -1.13% |
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ETH -1.60% |
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LTCUSD -5.33% |
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XMRUSD +1.09% |
Macro
UK: Bank of England (BoE) Governor Andrew Bailey expressed scepticism about a possible interest rate hike during the upcoming policy meeting on September 21, stating that the UK may be approaching the peak of the interest rate cycle, and the decisions on this issue have become more nuanced.
EU: Eurozone economic data continued to point to challenges as GDP growth was revised downward to 0.1% in the second quarter, with declining exports being a contributing factor. Retail sales volumes in the eurozone fell 0.2% sequentially in July, mainly due to weaker automotive fuel purchases, and investor morale in the region declined more than anticipated in September.
US: The US economic calendar produced generally positive surprises, particularly with the Institute for Supply Management’s report services sector activity in August reaching its highest level since February. Weekly jobless claims came in lower than expected, suggesting robust labour demand despite a slight increase in the unemployment rate in August. This news prompted a rise in short-term bond yields. The tax-exempt municipal bond market remained subdued as participants awaited new issuances from California and the Port Authority of NY/NJ, which affected the secondary market.
What to watch out for this week
- In the coming week, investors will be closely monitoring several key economic reports in the United States. The focus will be on the CPI report, which expects headline consumer prices to have risen 3.6 percent in the last month, marking the second consecutive month of acceleration. Conversely, the core index is expected to have increased by 4.3 percent, marking the smallest increase since September 2021. Additionally, retail sales are expected to have grown just 0.2 percent month-over-month, compared to 0.7 percent in July. Other notable reports include industrial production, producer and foreign trade prices, the preliminary estimate of Michigan consumer sentiment, business inventories, the NY Empire State Manufacturing Index, and the government’s monthly budget statement.
- In Europe, the European Central Bank (ECB) will make a crucial decision on its monetary policy on Thursday. It’s widely anticipated that the central bank will maintain its current borrowing costs, signaling a pause in its rate-hike campaign after nine consecutive increases pushed the deposit facility rate to a 22-year high of 3.75 percent. Traders will be paying close attention to any hints about the ECB’s plans for the remainder of the year, and the new economic forecasts will be scrutinised. On the data side, there will be a great interest in final inflation figures for Spain, France, and Italy, as well as the ZEW economic sentiment and wholesale prices for Germany. In addition, industrial production, labour costs, wage growth, and trade balance in the Euro Area will be closely monitored.
- In the UK, a number of significant indicators will provide insights into the country’s economic situation. These include the unemployment rate and wage growth, GDP growth for August, trade balance, and industrial production.
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