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Weekly Market Wrap: Jackson Hole overtakes the markets

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The two-day annual Jackson Hole symposium was the main theme driving the markets this week with intermittent bits of economic data over the week.

Monday was fairly quiet as lack of any economic data saw the markets trading in range. On a slow day, the markets reacted a bit to comments from various central bankers. BoJ’s Kuroda said that the central bank could expand monetary policy when it meets in September. His comments helped to lift the yen, but price action soon settled into a range for the most part of the week. The Fed’s Vice-Chair, Stanley Fischer was one of the FOMC members to join the hawkish group noting that the Fed was close to its targets of full employment and inflation.

Read: What is the Jackson Hole Symposium?

On Tuesday, the economic data was dominated by flash PMI’s from Japan and the Eurozone In Japan, flash manufacturing PMI continued to remain below the 50-level of the index, marking a contraction in the sector. In the Eurozone, PMI’s were mixed. While the composite PMI for the Eurozone rose to a 7-month high, Germany’s services sector posted a slowdown in August.

Markit’s economist, Oliver Kolodseike had this to say on the German data, “The long-standing theme of solid economic growth in Germany continued in August and based on the survey data available for the third quarter so far, we should expect further steady GDP growth.”

In the US, Markit’s flash manufacturing PMI rose slightly less than expected, missing estimates of 53.1 to fall to 52.1 in August. This was lower than July’s PMI print of 52.9. However, Markit said that the July and August readings suggested that the manufacturing sector in the US was continuing to rise steadily.

The US session also saw the release of the new home sales report which posted strong gains in July. Data from the US commerce department showed new home sales in the US rising 12.40% in July. It was the highest since October 2007.

Wednesday was another slow day for the markets. However, German GDP data was the main news in the Frankfurt trading session. The second quarter GDP growth for Germany was confirmed at 0.40%. Most of the gains came from increased exports which rose 1.20% while imports fell 0.10% on the quarter. The data underlined the need for fiscal support as Carsten Brzeski from ING said, “lack of new investment in the economy. To kick-start investment in an ageing economy, some government support is needed not only at the national level but also at the European level.”

The main news of the day was the South African rand which fell sharply after reports emerged that the country’s finance minister, Pravin Gordhan was facing possible police enquiry during his time as the head of the tax collection agency. The reports were later confirmed in the day by Gordhan himself. The South African rand extended its declines following a 3% drop late Tuesday.

Wednesday also saw the release of the weekly US crude oil inventories which showed a surprise build up of 2.5 million barrels for the week ending August 19. The data pushed oil prices lower with many analysts expecting oil to fall back to the $40 handle.

The markets were seen picking up some momentum by Thursday. Data from Germany’s Ifo institute showed that the country’s business climate index fell unexpectedly in August, while business sentiment on current conditions was also seen weaker compared to July.

In Sweden, the unemployment rate fell to an 8-year low at 6.30% after rising 7.60% in June. The country’s unemployment rate was in line with government forecasts of 6.30%. Data from the US on Thursday saw the durable goods orders beating estimates and reversing the declines from June. Durable goods rose 4.40% in July offsetting the 4.20% decline from June. Excluding transportation, core durable goods orders increased 1.50%.

The US dollar, however, failed to capitalize on the positive data and was seen sliding back to trade flat ahead of Friday’s speech from Janet Yellen. Gold prices managed to post a moderate recovery during the Asian session. Kansas City Fed President Esther George’s comments on Thursday were seen as hawkish, but the markets discounted her comments with the US dollar more focused on the upcoming Yellen’s speech.

On Friday, data from Japan showed that consumer prices continued to remain weak. Both the national and Tokyo’s core CPI gauges were negative, falling more than expected while the BoJ’s core CPI gauge rose only 0.50%, slower than June’s downward revised CPI of 0.70%. In the UK, the third quarter GDP confirmed the 0.60% quarterly growth matching previous estimates with growth recorded at 2.20% on an annualized basis. The US Q2 GDP data was confirmed at 1.10% as forecast, down from 1.20% annualized growth seen in the first estimates. However, corporate profits rose to a revised 4.90% from the previous quarter up from previous estimates of 2.20%. The data showed that the US economic growth remained broadly subdued in the second quarter.

The much-anticipated speech by Janet Yellen at the Jackson Hole symposium sent the markets briefly lower. Yellen said that the case for rate hikes strengthened in the recent months and said that the US economy is now nearing the Fed’s goal of maximum employment and price stability. The markets are seen stabilizing after an initial dip led by a stronger US dollar.

Summary of Economic events this week

  • Canada wholesale trade 0.70% vs. 0.50%
  • Japan flash manufacturing PMI 49.6 vs. 49.5
  • BoJ Gov. Kuroda Speech
  • Switzerland trade balance 2.93 billion vs. 3.79 billion
  • French flash services PMI 52.0 vs. 50.6; flash manufacturing PMI 48.5 vs. 49.1
  • Germany flash services PMI 53.3 vs. 54.3; flash manufacturing PMI 53.6 vs. 53.7
  • Eurozone flash services PMI 53.1 vs. 53.0; flash manufacturing PMI 51.8 vs. 52.1
  • US flash manufacturing PMI 52.1 vs. 53.1
  • US new home sales 654k vs. 575k
  • US Richmond manufacturing index -11 vs. 6
  • Eurozone consumer confidence -9 vs. -8
  • New Zealand trade balance -433mn vs. -320mn
  • Australia construction work done q/q -3.70% vs. -1.90%
  • Germany final GDP q/q 0.40% vs. 0.30%
  • UK BBA Mortgage Approvals 37.7k vs. 38.5k
  • US HPI m/m 0.20% vs. 0.30%
  • The US existing home sales 5.39mn vs. 5.52mn
  • US crude oil inventories 2.5mn -0.50mn
  • Japan SPPI y/y 0.40% vs. 0.10%
  • German Ifo business climate 106.2 vs. 108.5
  • Sweden unemployment rate 6.30% vs. 6.10%
  • UK CBI realized sales 9 vs. -5
  • US Core durable goods orders m/m 1.50% vs. 0.40%; durable goods orders 4.40% vs. 3.40%
  • US weekly unemployment claims 261k vs. 265k
  • US flash services PMI 50.9 vs. 51.9
  • Tokyo Core CPI y/y -0.40% vs. -0.30%
  • National Core CPI y/y -0.50% vs. -0.40%
  • BoJ Core CPI y/y 0.50% vs. 0.70% previously
  • Gfk German consumer climate 10.2 vs. 10.2
  • Eurozone M3 Money supply y/y 80% vs. 5.0%; private loans y/y 1.80% vs. 1.80%
  • UK second estimate GDP q/q 0.60%% vs. 0.60%
  • UK preliminary business investment q/q 0.50%vs. -0.90%
  • US preliminary GDP q/q 1.10% vs. 1.10%
  • US goods trade balance -59.3bn vs. -62.3bn
  • Fed Chair Yellen speech
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