Financial Markets Outlook

Posted by SM-INVEST -
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Previous Week’s Summary

This was yet another volatile week on the financial markets. Global equities continued to react to the ongoing trade war between the U.S. and China. The week began with markets focused on turmoil in the geopolitical landscape. Argentina, India-Pakistan, Brexit, Italy are all under global scrutiny. Additionally, the unrest in Hong Kong has the potential to harm Hong Kong as an economic gateway to Asia. A sudden announcement from the U.S. administration stated that it will delay tariffs on some Chinese goods. The delay, mostly targeting electronics and other consumer goods, will be until December. As a result, stocks and oil prices experienced a surge in value. The Dow Jones ended the week down by 1.53%. The S&P 500 was lower by 1.03% for the week, with the Nasdaq down 0.8%.

will be until December. As a result, stocks and oil prices experienced a surge in value. The Dow Jones ended the week down by 1.53%. The S&P 500 was lower by 1.03% for the week, with the Nasdaq down 0.8%.

After hitting new highs in July, the major indices have fallen back. That is mostly because of the Trump Administration’s threats to impose new tariffs on imports from China from September. Despite Friday’s positive trading day, the Dow was off 5.5% from its July peak. Additionally, the S&P 500 was also down 4.6% and the Nasdaq decreased by 5.3%.

In Europe, Brexit remained a worry with no apparent progress only 2 and a half months before the exit date. Meanwhile, the U.K. registered its first GDP contraction since 2012. The drop, 0.2%, came in the second quarter and not the first. Moreover, the pan-European STOXX Europe 600 Index lost about 0.5%. The U.K.’s FTSE 100 Index dropped 1.8%, and the heavy-exporter German DAX index decreased by about 1.3%.

The Week Ahead on Financial Markets

Financial experts seem to have trouble understanding how exactly both U.S. and China want to solve the trade war crisis. As a result, the uncertainty is at the markets’ expense and it will continue to suffer from volatility. The upcoming week will have only a few events on the economic calendar.

The week will open on Monday with Eurozone Consumer Price Index (CPI) announcement. This could offer a better understanding of the Eurozone inflation trends. Higher-than-expected numbers are generally positive for the European currency against other major currencies.

On Wednesday, U.S. existing home sales for July are out. This could indicate the strength of the housing market and the overall strength of the U.S. economy. Higher reading is, in general, a positive for the USD against other currencies. Later that day, crude oil inventories will be published. After last week’s unexpected inventories an increase could surprise this week’s numbers. If the increase in crude inventories is more than the estimates, it implies weaker demand. As a result, this could be negative for crude oil prices.

U.S. Federal Open Market Committee (FOMC) Meeting Minutes is due later on Wednesday. Currency traders examine these meetings for clues for future interest rate decisions.

Ending the Trading Week

On Thursday, German manufacturing Purchasing Managers’ Index will be published. This data can be an accurate indicator of overall economic performance, as purchasing managers usually know their company’s performance. Better results are generally positive for the EUR.

On Friday, Federal Reserve Chairman Powel will hold a speech. Investors are generally looking for clues about future interest rate policy. New U.S. home sales data will be out as well on Friday. Higher than expected numbers will be positive for USD and U.S. significant indices.

Next week will continue to be volatile mainly because of the continuing tensions between U.S. and China on the trading arena, as it seems that there aren’t any economic data next week to have a serious impact on the markets.

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