Weekly Market Recap


Stocks rose as central bank announcements dominated headlines and investors continued playing the “will they or won’t they?” monetary policy game. In the US, the Fed left interest rates unchanged. As we’ve said, the Fed isn’t likely to make significant moves until after the election. The Bank of Japan (BOJ) published its monetary policy assessment, which investigated why negative interest rates and ongoing quantitative easing haven’t stoked more growth and inflation. Consequently, the BOJ announced a new policy framework of attempting to steepen the yield curve—dubbed “yield curve control.” We view this announcement as just talk, rather than a meaningful policy shift. In the EU, Italian Prime Minister Matteo Renzi announced he won’t resign if he loses the upcoming referendum on constitutional reform. The eurozone PMI missed expectations in September, with an acceleration in manufacturing offset by weaker services. In the week ahead, the first of three scheduled US presidential debates is Monday, September 26. US personal spending will be released, and OPEC meets in Algiers to informally discuss production caps, although no changes are expected.


Global stocks ended the week lower amidst global monetary policy uncertainty and European bank concerns. US economic data were mixed. August’s core Consumer Price Index (CPI) slightly accelerated to 2.3% y/y, just ahead of the 2.2% consensus. Weakness in autos drove a 0.3% m/m drop in August retail sales. However, longer-term consumer spending growth remains firmly intact: Retail spending increased 1.9% y/y. August eurozone CPI increased 0.2% y/y, in line with expectations. August UK retail sales rose 6.2% y/y, exceeding expectations and providing further evidence Brexit fears may have been overblown. The Bank of England kept its key rate at 0.25% and its quantitative easing program unchanged. August data from China were positive, further alleviating growth concerns in the world’s second largest economy. Both industrial production (6.3% y/y) and retail sales (10.6% y/y) beat expectations, while new loans doubled July’s figures. Weakness in Japanese economic data continued, as July industrial production fell 4.2% y/y—farther than estimated. In the week ahead, The Fed meets on September 21 to set monetary policy. The eurozone reports September consumer confidence. China releases August property prices while the Bank of Japan considers changes to its stimulus efforts.


Global stocks ended lower, as geopolitical and rate-hike fears drove markets lower Friday, reversing the gains earlier in the week. US data releases were light. The Institute for Supply Management’s non-manufacturing purchasing manager’s index (PMI) expanded less than expected in August (51.4). July wholesale inventories were flat while wholesale trade missed projections (0.4% y/y). In the eurozone, markets focused on the European Central Bank’s (ECB) expected decision to leave each of its three key rates on hold. Furthermore, citing a positive economic outlook, the ECB wouldn’t discuss an extension of its quantitative easing program set to end in March 2017. UK PMIs bounced back from July lows as August services PMI rose to 52.9. Chinese August trade data surprised with imports rising 1.5% y/y (the first growth in 21 months) and exports falling 2.8% y/y, less than the expected 4% decline. In the week ahead, the US releases August retail sales, inflation and September consumer sentiment data. The eurozone releases August inflation and July industrial production. The UK will announce August inflation and retail sales data, July employment, and the Bank of England’s rate decision. China releases August money supply, retail sales, industrial production and lending data. Japan releases July industrial production.