Asian markets made a poor start this Monday to this busy week packed with major US and Chinese economic data and the launch of Apple’s latest iPhones. With the Federal Reserve entering its traditional blackout period ahead of its upcoming September policy meeting, the main focus this week will be on US inflation figures for August. The UK is also due to release what will be closely watched inflation data, along with updates on employment and retail sales. A few ECB speeches this week may shed more light on last week’s decision to scale back purchases. China is due to release data on industrial production, retail sales and fixed assets investment on Wednesday, which will show the economic impact of the Covid-19 virus outbreak in August.
US equities notched their biggest decline since mid-June in a volatile trading last week. The S&P 500 fell 0.8%, pushing its loss for the holiday shortened week to 1.7%. Apple Inc was the biggest decliner in the Dow Jones Industrial average on Friday, after a court ordered the iPhone maker to make changes to the way it generates money from its App Store. The focus this week will be on the readings of US consumer prices on Tuesday, which is expected to see core inflation ease to 4.2%, while retail sales on Thursday could show another decline as the spread of the Delta variant spooks shoppers. The tension will be mounting ahead if the Fed’s next meeting on September 21-22. The 10-year treasury yields have nudged higher last week to 1.38%. The drift higher in yields and the general air of risk aversion helped the dollar recoup some losses last week and brought DXY to 92.62, off recent lows of 91.94.
European stocks markets have opened in a mixed mood this morning with DAX trading 0.3% higher, FTSE 100 rising 0.2% and CAC 40 dropping 0.2%. Last week ECB decided to slow down its emergency bond purchases in the fourth quarter, citing higher inflation and stronger gross domestic growth. ECB President Lagarde stressed that the move was not the start of tapering. The focus this week will be on comments from the Chief Economist Philip Lane for more insights into the thinking at the central bank. Last week the Bank of England governor, Andrew Bailey warned that the economic rebound in the UK is slowing, so this week’s data on inflation, employment and retail sales will be closely watched, particularly ahead of the BOE upcoming policy meeting on September 23. EURUSD is trading under 1.18, the lowest since late August, as a cautious market mood boosts the safe-have dollar. GBP/USD started the week on a subdued note and remained pressured below 1.3850.
Asian shares traded lower this Monday, while Nikkei stayed near heights last visited in 1990. Hopes for fresh stimulus from a new prime minister in Japan saw Nikkei surge 4.3% last week. MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.7% after bouncing on Friday. Chinese blue chips were off 0.3%. China releases a swath of data on retail sales, industrial output and urban investment on Wednesday that is expected to show a further slowdown in the world’s second biggest economy. China’s yuan eased off the one-week highs against the dollar, as renewed concerns over US-China relations and doubts about the Chinese currency’s recent strength prompted some investors to buy dollars.
Oil prices rose this Monday with Brent trading 0.5% higher at $73.25 a barrel and WTI also 0.5% higher at $70.04. Both are trading at their highest levels since September 3. Oil prices rose as concerns over US output following damage from Hurricane Ida supported the market along with expectations for higher demand. About three quarters of the offshore oil production in the US Gulf of Mexico, which is roughly equal to what, OPEC member, Nigeria produces, has remained halted since late August. Later this Monday OPEC will release its latest monthly assessment of worldwide conditions, with the global growth of Covid-19 cases likely to weigh on their future demand prediction.