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The week in financial markets – 9 September 2016

Monday 5 September

  • The UK services PMI reading in August rose by 5.5pts to 52.9 and well ahead of the consensus 50.0 forecast. The magnitude of the rebound was in fact the biggest since the survey began two decades ago.
  • The final Euro area services PMI was revised down 0.3pts to 52.8. That largely came about following a 1.6pt downward revision to Germany (to 51.7) which more than offset a small upward revision to France (+0.3pts to 52.3) and better than expected readings in Spain (56.0 vs. 54.2 expected) and Italy (52.3 vs. 51.8 expected). All in all the final composite PMI for the Euro area was revised down from the flash reading of 53.3 to 52.9, which is slightly below the 53.2 in July.

Tuesday 6 September

  • In Europe the only data to note was a slightly weaker than expected Germany factory orders reading for July (+0.2% MoM – month on month- vs. +0.5% expected) which our European economists noted was driven by a disappointing -1.5% fall in core orders. Elsewhere there was no change to the final Q2 GDP reading for the Euro area at +0.3% QoQ and +1.6% YoY.
  • In the US, The IBD/TIPP economic optimism reading for this month fell 1.7pts to 46.7 (vs. 48.1 expected) with the economic outlook component edging down 4.3pts to 40.3. Also of note was the decline in the labour market conditions index last month to -0.7 (vs. 0.0 expected) from +1.3. Aside from the positive reading in July, the index has posted a negative reading every month this year.

Wednesday 7 September

  • In the US the BLS reported a decent jump in job openings in July to 5.87m (vs. 5.63m expected) from 5.64m previously, which in the process marked a new cyclical high.
  • In Europe Germany industrial production dropped unexpectedly in July (-1.5% MoM vs. +0.1% expected).
  • In the UK the data was a bit more mixed. Industrial production (+0.1% MoM vs. -0.2% expected) was a bit better than expected in July, however manufacturing production (-0.9% MoM vs. -0.3% expected) saw a sharper decline than the market had expected.

Thursday 8 September

  • In Japan real Q2 GDP growth was revised up to a seasonally adjusted +0.2% QoQ from the first preliminary estimate of 0.0%.
  • The latest trade data in China was supportive. In USD terms exports increased to -2.8% YoY (vs. -4.0% expected) from -4.4% and imports rose +1.5% YoY (vs. -5.4% expected) having been down double digits previously.
  • As expected ECB policy was held steady but more significantly there was no announcement of a QE extension which had divided opinions in the market.
  • WTI rallied +4.66% to close at $47.62/bbl and the highest level in nearly two weeks. That came following the latest US crude inventory data with the EIA reporting that inventories fell a remarkable 14.5m barrels last week in what is the biggest drop since January 1999 and the second biggest with records going back to 1982.

Friday 9 September 

  • August CPI in China printed at +0.1% MoM and +1.3% YoY which is a fair bit down from +1.8% YoY in July and also well below expectations of +1.7% YoY.
  • German exports in July fell 2.6% MoM (vs +0.8% expected).

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