Italy and France Industrial Production, UK Unemployment, API Oil Inventories
While the dollar made some advances against currencies sometimes seen as ‘safe havens’ like the CHF or the JPY, it also faced a strengthening of the euro and pound (GBP). Emerging market currencies like the Indian rupee (INR) or the South African rand (ZAR) also continued to appreciate against the greenback.
The continued recovery in equities, while at the same time yields on key government bonds were seen recovering, pushed gold prices below the $1,500 level per troy ounce for the first time in more than two weeks. Other precious metals like platinum or silver also faced a further downside.
After a mixed performance in stocks on Monday, most major indices around the world traded lighter by Tuesday morning. Chinese markets were lower when consumer and producer price inflation data was released, indicating higher inflation in consumer prices at 2.8% y/y in August, while the deflation in producer prices at -0.8% y/y also intensified.
For Tuesday morning data on the French and Italian industrial production levels in July can be expected, as well as unemployment figures from the United Kingdom. From the US then the NFIB Small Business Optimism Index and Redbook store sales figures are expected. Later in the day the American Petroleum Institute (API) also publishes its weekly crude oil inventory change data.
The euro traded marginally higher by Monday evening, given the overall pullback of the dollar but also over reports that Germany is considering measures to stimulate public investments while circumventing the strict national rules against adding new debt.
The key test for the common European currency this week will be the meeting of the European Central Bank (ECB) on Thursday, where the central bank is expected to announce whether it intends to tweak rates or other mechanisms to control the monetary policy. While ECB official mostly did not seem in favour of substantial stimulus packages, analysts still see potential for some surprises at this week’s meeting as the euro zone faces sluggish growth and a relatively low inflation.
The pound traded firmer at the start of the week, trading at a six-weeks high by Tuesday morning. While a bill to prevent a disorderly Brexit by October 31 was approved on Monday, Prime Minister Boris Johnson was unable to get the approval of the opposition to hold an early general election in October. With the new law in place, the Prime Minister would be forced to seek another extension from the EU, which he previously categorically declined to do. Otherwise the agreement from Parliament for a new withdrawal agreement or a “no deal” exit would be required.
Fundamentals looked less gloomy than expected in the UK with Industrial Production data taking a hit of -0.9% vs. -1.1% on an annual basis, with manufacturing output increasing by 0.3% vs. -0.1% expected in July. On Tuesday unemployment data for August will be released.
Oil markets were bullish at the start of the week, given the overall positive market sentiment. The recent announcement of a shakeup in the Saudi Arabian Energy Ministry could have also impacted the markets. While there were concerns that the new Energy Minister Prince Abdulaziz bin Salman is directly related to the leadership of the Kingdom, many experts don’t believe that significant changes would follow, given his experience dealing in the oil sector and through OPEC.
Meanwhile it has been reported that the IPO of the state-owned Aramco is being pushed forward with discussions of a secondary listing location mentioned by now.
Besides the usual data releases on crude oil inventories by the American Petroleum Institute (API) this Tuesday and then the Energy Information Administration (EIA) on Wednesday, a special focus will be on the OPEC meeting this week starting on Wednesday.
There was a clearly visible divergence in the overall stock performance of the general stock market and tech stocks with the US Tech 100 being the only one of the four key US indices (the others being US 30, US 500 and US 2000) closing lower on Monday. It should be however noted that mostly smaller companies in terms of market capitalization like the identity management company Okta (-9.76%), cloud communication company Twilio (-9.51%) and the collaboration software company Slack (-8.88%) were the ones suffering major losses. On the other hand major tech companies like Apple (+0.45%) or Facebook (+0.68%) indicated a stable performance as also seen in the FANG+ (+0.45%) index, which includes these and eight other top tech companies.
While the mood in the tech sector was overall mixed, chip stocks (US Semiconductors ETF +0.40%) managed to push higher with Intel (+1.46%) reaching a new monthly high after a disastrous market performance at the start of last month. Intel had to admit that it lost market share to arch-rival AMD, but vowed to get “more aggressive” to win back that lost market share.
While most companies by now have released their quarterly figures this week still some numbers can be expected from companies like Zscaler (10.09.), Aurora Cannabis (11.09.) and Broadcom (12.09.).
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