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The week in financial markets – 19 August 2016

Monday 15 August

  • The ECB disclosed that it held €16.23bn of corporate bonds as of August 12th which implies net purchases settled last week of €1.25bn. That means the average daily run rate last week was €250m which is lower than the €353m average daily run rate since the program started.
  • After Saudi Arabia’s energy minister signalled that the country was open to measures to stabilise the market last week, Russia’s Energy Minister Alexander Novak said that Russia is also open to such talks with the WSJ also suggesting that the country is already consulting with Saudi Arabia and other countries.

Tuesday 16 August

  • In the US, the July CPI report showed headline inflation at 0.0% MoM as expected although the YoY rate rounded down to a slightly lower than expected +0.8% from +1.0% in June. There was better news in the latest activity indicators however where industrial production rose a bumper +0.7% MoM last month (vs. +0.3% expected). The latest housing starts revealed starts rose +2.1% MoM in July (vs. -0.8% expected) leaving the annualised level of starts at the highest since February. Building permits (-0.1% MoM vs. +0.6% expected) were a bit weaker than expected.
  • In Germany the August ZEW current situations index bounced back from its post-Brexit decline to rise nearly 8pts to 57.6 (vs. 50.2 expected).
  • The UK’s July headline CPI reading came in as expected at -0.1% MoM. The YoY rate nudge up to +0.6% while the core reading was down to +1.3%.

Wednesday 17 August

  • The latest UK employment numbers were released, some of which covered the post-Brexit period. In the three months to June 172k jobs were added which was a bit more than expected (150k expected).
  • The July FED meeting minutes was released and it revealed that members generally agreed before taking another step in removing monetary accommodation, it was prudent to accumulate more data in order to gauge the underlying momentum in the labour market and economic activity

Thursday 18 August

  • In Japan exports weakened to -14.0% YoY (vs. -13.7% expected) in July from -7.4% the month prior, while imports (-24.7% YoY vs. -20.0% expected; -18.8% previously) were also lower despite the strengthening Yen. In China the latest property prices data for July showed that prices increased in 51 cities last month (excluding government subsidised housing) from 55 in June. This is out of 70 cities signalling a slight cooling off in property prices gains.
  • In the UK the July retail sales data came in much better than expected, adding to the reasonably solid post Brexit data that we’ve seen this week. The YoY rate including fuel is now +5.9% (from +4.3%) which is the highest since September last year.
  • In Europe the July CPI reading for the Euro area came in lower than expected (-0.6% MoM vs. -0.5% expected) and the unemployment rate in France ticked down three-tenths to 9.9% in Q2.
  • In the US the main data of note was a pickup in the headline Philadelphia Fed manufacturing index of 4.9pts to +2.0, which was in line with the market. The initial jobless claims declined 4k last week to 262k.

Friday 19 August

  • Germany’s PPI came in slightly higher than expected with a MoM change of 0.2% (vs. 0.1%), showing a slight gain in price level. This takes the YoY change to -2.0% (vs. -2.1% expected).
  • The UK’s Public Sector Net Borrowing for July came in at a deficit of £1.47bn for July (vs. £1.20bn expected).
IndexActual priceWeek to dateMonth to dateYear to date
S&P 5002187.
Eurostoxx 600340.7-1.5-0.3-6.9
MSCI Emerging Markets916.40.74.915.4
FTSE 1006854.61-0.891.949.81
Treasury yield 10 years1.54-0.030.09-0.73
Bund yield 10 years-
Gilt yield 10 years0.560.04-0.12-1.40
USD vs Sterling1.3141.69-0.70-10.84
Sterling vs Euro0.8610.30-1.95-14.44
USD vs Emerging Markets FX69.6310.101.766.08
Commodity Index189.
Brent Oil50.88.119.636.2

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