2023 - Week 36
Alessandro Hor
Investment Manager | Fund Management | Compliance & AML | Capital Transactions | Asset Management | Risk Management
Markets’ overview:
As anticipated in last week’s article, equity markets recorded a negative performance. The #S&P500 closed down 1.29% and the #NASDAQ -1.93%. Slightly better but very much in line the #Stoxx600 which closed the week at 454.66 (-0.76%) and the Asian markets with the #Nikkei -0.36% and the #HangSeng -1.04%.
Consequently, the #VIX moved up from 13.09 to 13.84 (+5.73%) and the #SKEW index moved down to 138.18 (-4.23%).
As mentioned last week we are moving back to more normal volumes as the holiday season is now over and I believe the valuations will be put under pressure over the next few weeks.
Energy prices were, again, on top of newspapers headlines: after Saudi Arabia announced an extension of its voluntary reduction of 1 million barrels per day, crude oil and other energy commodities experienced a continued rally and European gas prices surged due to an upcoming strike at Australia's Gorgon and Wheatstone projects following failed negotiations between Chevron and the unions.
US
In August, the ISM services PMI demonstrated resilience in the services sector of the economy, jumping to 54.5. However, mortgage demand has reached a 27-year low due to thirty-year mortgage rates remaining above 7%, which has deterred potential buyers.
In July, U.S. wholesale inventories experienced a decline, while sales witnessed a significant increase. As a result, the inventories-to-sales ratio reached its lowest level since February, indicating a positive trend in the market. Additionally, consumer credit showed a modest increase at a seasonally adjusted annual rate of 2.5%.
Europe
Euro zone consumer inflation expectations for three years ahead rose slightly in July, according to the European Central Bank survey. Expectations increased from 2.3% to 2.4%, while one-year expectations remained steady at 3.4%.
The ECB has been striving to dampen long-term price expectations and meet its 2% inflation target by raising interest rates, currently at 3.75%. However, the euro zone faces a weakening economic outlook and a heightened risk of recession in the third quarter.
August's final composite Purchasing Managers' Index (PMI) figures showed the sharpest output decline in 33 months, with both the services and manufacturing sectors contracting. Producer prices in the euro area continued their downward trend, falling 7.6% YoY in July. Euro zone business activity dropped significantly in August, as indicated by the final PMI output index of 46.7, below the preliminary read of 47.
领英推荐
The ECB's upcoming monetary policy meeting on September 14 has a 25% probability of a maximum 25 basis point hike.
China
In August, China experienced the slowest monthly growth in its services sector so far this year, as reported by a survey. This adds to a series of disappointing data and raises concerns about Beijing's ability to achieve its growth target of approximately 5% for the year. Unlike during the global financial crisis in 2008-09 when China implemented stimulus measures to drive growth, President Xi Jinping's current focus is on debt control and reducing the property sector's share of the economy. This suggests that a stimulus package is unlikely to be released.
The impact of a weaker GDP trend in China, the world's second-largest economy, would be felt by almost every country, according to the IMF.
According to the Caixin survey, China's services sector witnessed its slowest expansion since December 2022. The Caixin Purchasing Managers' Index (PMI) for August dropped to 51.8 from 54.1 in July.
Furthermore, China's exports experienced an 8.8% decline in August, while imports have been falling year-on-year every month throughout the year.
Definition
INITIAL JOBLESS CLAIMS
Initial Jobless Claims refer to the number of individuals who have filed for unemployment benefits for the first time during a specific reporting period. It serves as an indicator of the number of newly unemployed individuals and provides insights into the overall health of the job market. A lower number of initial jobless claims suggests a stronger job market, while a higher number indicates increased unemployment.
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