A review of the week past and the week ahead

Charts (5)

What mattered last week:

  • A 5th straight week of gains for the S&P500 as it closed 3.30% higher, supported by positive news about a coronavirus vaccine and the Fed’s shift to inflation average targeting.
  • The Feds move to inflation targeting was announced in a speech by Fed Chair Powell at the Jackson Hole Symposium and will allow the Fed to keep rates at near zero for a longer period without having to raise rates to pre-empt inflation.
  • New coronavirus cases trended lower in the U.S, Japan, and Australia although the number of new cases in Europe is rising.
  • Economic data in the U.S was mixed. Durable goods, personal spending and personal income were higher than expected. However, consumer confidence tumbled to its lowest level since 2014.
  • Japanese PM Abe resigned for health reasons catching the market by surprise on a Friday afternoon.
  • Volatility, as measured by the VIX index, closed slightly firmer at 23.0.
  • U.S. 10-year yields rose ~10bp to 0.73%.
  • Gold closed firmer at U.S $1965 from U.S $1940 the previous week.
  • A fourth straight week of gains for crude oil to closed 1.50% higher, at U.S $42.97/bbl.
  • The ASX200 closed down -0.61% at 6073.8, unable to break free of the shackles provided by the 6000 level.
  • In FX, the AUDUSD closed at .7365, its highest level in over two years.

For the week ahead, the key events are:

Australia: Private sector credit, business inventories, company gross profits (Monday), building permits, current account, RBA interest rate meeting (Tuesday), Q2 GDP (Wednesday), balance of trade (Thursday), retail sales (Friday).

  • RBA interest rate meeting (Tuesday): The RBA is expected to make no change to its current monetary policy settings including leaving the targets for the cash rate and the yield on 3-year Australian Government bonds at 25 basis points.

New Zealand: ANZ Business confidence (Monday), building permits, and terms of trade (Tuesday).

China: NBS manufacturing and non-manufacturing PMI (Monday), Caixin manufacturing PMI (Tuesday), Caixin services, and composite PMI (Thursday).

Japan: Industrial production, retail sales, consumer confidence (Monday), unemployment (Tuesday).

U.S: ISM manufacturing PMI (Tuesday), factory orders, balance of trade, initial jobless claims, ISM non-manufacturing (Thursday), non-farm payrolls (Friday).

  • Non-farm payrolls (Friday): Expectations are for a 1.5 million gain in payrolls in August and the unemployment rate to fall to 9.9%.

Canada: Building permits (Monday), Markit manufacturing PMI (Tuesday), balance of trade (Thursday), employment (Friday).

Euro Area: German inflation (Monday), German and EA unemployment and EA inflation (Tuesday), German retail sales (Wednesday), EA retail sales (Thursday), German factory orders and construction (Friday).

UK: Nationwide housing prices (Wednesday), construction PMI (Friday).

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