The week in financial markets – 26 August 2016

Monday 22 August

• A meeting of European leaders took place between Merkel, Hollande, and Renzi. This was to show their commitment to the EU post Brexit. The leaders discussed a plan to bolster Europe’s economy and also security. The talks were also supposedly seen as a show of support for Renzi from Merkel ahead of the upcoming constitutional reform referendum in Italy.
• The latest ECB CSPP numbers showed an increase in their purchases from a €250m daily run rate the week before to €321m this past week.

Tuesday 23 August

• The Euro area composite PMI edged up 0.1pts to 53.3 (vs. 53.1 expected) which is the highest since January although the reading has consistently sat at or around 53 since then.
• In the UK the flash August consumer confidence reading for the Euro softened 0.6pts to -8.5 and is now at the lowest since April.
• US manufacturing data disappointed with the flash manufacturing PMI in August dropping 0.8pts to 52.1 (vs. 52.6 expected) and the Richmond Fed manufacturing survey weakening 21pts to -11 (vs. +6 expected). Better news came in the housing sector where new home sales surged to a near nine-year high of 654k annualized after rising +12.4% MoM in July (vs. -2.0% expected)

Wednesday 24 August

• In the US existing home sales were weaker than expected in July (-3.2% MoM vs. -1.1% expected), whilst the FHFA house price index for June rose +0.2% MoM.
• In Germany Q2 GDP grew +0.4% QoQ and +1.8% YoY. Net exports compensated for a small decline in final domestic demand, but only due to tumbling imports. Investment growth was weaker than expected.

Thursday 25 August

• The Germany IFO survey saw the headline business climate reading fall 2.1pts to 106.2 (vs. 108.5 expected) this is the lowest reading since February and also the biggest monthly decline since May 2012.
• In the US there were better than expected durable and capital goods orders data. Headline durable goods orders rose +4.4% in July (vs. +3.4% expected) while ex-transportation (+1.5% MoM vs. +0.4% expected) also rose more than expected. Initial jobless claims held steady last week at 261k (down 1k) with the four-week average now at 264k. The services PMI declined 0.5pts this month to 50.9 which was disappointing relative to expectations (51.8 expected) and is the lowest reading since February.

Friday 26 August

• UK’s Q2 GDP revision came out to be in line with expectations at 0.6% QoQ growth, whilst France’s GDP growth stalled in Q2 as per market forecast.
• The US Q2 GDP revision showed a QoQ growth of 1.1%, whilst the GDP price index beat expectations at 2.3%, which was slightly higher than 2.2% expected.