Global stocks rise as political tensions cool, whilst optimism rises as central bankers are set to meet at Jackson Hole
Markets often rise before a scheduled meeting of the most powerful global banking individuals takes place. The G7 or G30 meetings and the world trade forums, often instil a sense of confidence in investors, a rational belief that the key movers and shakers have everything under control and that projection of competence goes a long way to allay global economic fears. With the meeting at Jackson Hole due to take place from Thursday onwards, investors are buying into the theory that central bankers; such as Janet Yellen and Mario Draghi, will discover a new elixir over the weekend, which will enable them to unwind from the gravity defying balance sheets the Fed and ECB have created since 2007. They’ll then carefully apply this new ointment to our engorged financial system, without harming equity and bond markets. The phrase “good luck with that” comes to mind.
Trump turning his attention to Afghanistan, as opposed to bickering with North Korea and his own government, also helped the investment mood on Wall Street. The DJIA rose by circa 200 points and 0.90% on Tuesday, the SPX closed up 0.99% and the Nasdaq up 1.34%. The dollar rose versus its main peers during Tuesday’s sessions; the dollar index rose by 0.4%, EUR/USD fell by 0.5% to 1.1763, USD/JPY fell by circa 0.6% to 109.57, and GBP/USD fell by 0.6% to 1.2821, whilst USD/CHF rose 0.3% to 0.9677. Gold fell to $1284 per ounce, down circa 0.6%, WTI oil ended the day close on flat, on the daily pivot point line, at $47.62 per barrel.
There was very little in the way of economic calendar events concerning the USA on Tuesday, other than the house price index falling to 0.1% MoM and the Richmond Fed manufacturing index beating expectations of 10, to come in at a reading of 14. From Canada we learned that retail sales fell to 0.1% in June, from the 0.5% recorded in May.
European markets also soared on Tuesday, the UK printed some encouraging data regarding government borrowing; public sector net borrowing recorded a small surplus for July, albeit a small surplus and likely to be temporary phenomena, the UK’s FTSE 100 rose sharply as a consequence, investors believing that the UK’s government is displaying fiscal competence, in the threat of a Brexit induced economic meltdown. In other European news, the ZEW surveys for Germany and Europe were overall inconclusive, however, the German economic sentiment survey missed the forecast of 15, by coming in at 10, far short of July’s reading of 17. STOXX 50 closed up 0.94%, DAX up 1.35%, CAC up 0.87%, and the UK’s FTSE 100 up 0.76%.
Significant economic calendar events for August 23rd, all times quoted are London (GMT) time
07:30, currency impacted EUR. Markit/BME Germany Manufacturing PMI (AUG P). The forecast is for a fall to 57.1, from the 58.1 reading in July.
07:30, currency impacted EUR. Markit Germany Services PMI (AUG P). The forecast is for an improved reading of 53.3, from the 53.1 recorded in July.
08:00, currency impacted EUR Markit Eurozone Composite PMI (AUG P). The prediction is for a reading of 55.5, a slight fall from the 55.7 registered in July.
13:45, currency impacted USD. Markit US Manufacturing PMI (AUG P). The expectation is for a reading of 53.5, a fall from July’s 53.3
13:45, currency impacted USD. Markit US Services PMI (AUG P). The anticipation is for a reading of 54.9, up from 54.7 recorded in July.
13:45, currency impacted USD. Markit US Composite PMI (AUG P). A reading of 54.6 is expected to be maintained.
14:00, USD New Home Sales (MoM) (JUL). A flat reading of 0.0% is forecast, from the 0.8% print in June.
14:00, currency impacted EUR Euro-Zone Consumer Confidence (AUG A). Confidence is expected to slip to -1.8, from the -1.7 registered in July.
22:45, currency impacted NZD. Trade Balance (New Zealand dollars) (JUL). The trade balance is forecast to come in at -200m, from 242m in June.