2023 - Week 37
Alessandro Hor
Investment Manager | Fund Management | Compliance & AML | Capital Transactions | Asset Management | Risk Management
2023 – Week 37
Markets’ overview:
Global equity markets recorded a mixed performance last week. The #S&P500 closed down 0.16% and the #NASDAQ -0.39%. On the other hand, European and Asian markets performed positively. The #Stoxx600 which closed the week up by 1.60%, the #Nikkei +2.98% and the #HangSeng +0.20%.
The #VIX moved down from 13.84 to 13.79 (-0.36%) and the #SKEW index moved up to 142.92 (+3.43%).
US
According to the data issued by the US Bureau of Labor Statistics last Wednesday, inflation in the United States, as indicated by the Consumer Price Index (CPI) change, experienced a notable increase in August. On a yearly basis, it rose to 3.7% compared to 3.2% in July, surpassing market expectations of 3.6%. The monthly reading aligned with forecasts at 0.6%, while the core annual reading, meeting expectations, decreased from 4.7% in July to 4.3%.
The increase in the CPI was expected as the official report noted that “the index for gasoline was the largest contributor to the monthly all items increase, accounting for over half of the increase.” Looking at the energy index only, it rose 5.6% in August.
The Commerce Department released data on Thursday regarding retail sales in August, which exceeded expectations with a month-on-month increase of 0.6%. Similar to the CPI data, the primary factor behind this increase was the rise in energy prices, while the underlying spending trend slowed down during the month. This slowdown can likely be attributed to the impact of inflation and higher borrowing costs.
Examining consumer habits in more detail reveals interesting insights. Spending on sporting goods, hobbies, books, and musical instruments decreased, while grocery store sales and department store purchases saw an increase. An important indicator for economists to assess household finances, dining out, rose by 0.3% in August, following a growth of 0.7% in July.
The Labor Department provided an update on Initial Jobless Claims, indicating an increase from 217,000 to 220,000 for the week ending on September 9th. This data confirms that the job market remains tight.
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Europe
This was the week of the European Central Bank meeting. On September the 14th the ECB raised the rates for the 10th meeting in a row, bringing its deposit rate to 4%. According to the ECB statement: “Based on its current assessment, the Governing Council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target”.
Inflation in European countries remains elevated (above 5%) with the risk of a slowing economy, this brings back the risk and fear of a Stagflation scenario.
China
According to data released by the National Bureau of Statistics (NBS) on Friday, China's fixed-asset investment increased by 3.2% compared to the same period last year, during the first eight months of 2023. In addition, China's industrial output recorded a growth rate of 4.5% in August compared to the previous year, showing an acceleration from the 3.7% pace observed in July. This suggests that the recent support measures implemented may be gradually stabilizing the struggling economic recovery.
Chinese retail sales, which serve as a measure of consumption, experienced a faster growth rate of 4.6% in August, supported by the summer travel season. This growth rate represents the swiftest expansion since May, surpassing the 2.5% increase observed in July and the expected 3% increase.
These figures follow better-than-expected bank lending data, a reduction in the declines of exports and imports, and a decrease in deflationary pressure.
Definition
RETAIL SALES
Retail sales refer to the total amount of goods and services sold by retailers to individual consumers for personal use. It is a key economic indicator that provides insight into consumer spending patterns and trends. Retail sales encompass a wide range of products, including clothing, electronics, groceries, furniture, and automobiles, among others. Monitoring retail sales is crucial for assessing the health of the economy and understanding consumer behavior, as it directly impacts businesses, employment, and overall economic growth.
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