What mattered last week and a preview of the week ahead 19th August

What mattered last week:

• The S&P500 fell for the third straight week after soft economic data in China and Germany triggered fresh signals from the U.S. bond market that a recession is becoming more likely.
• Specifically, the yield on the 10-year Treasury rate fell below the 2-year rate for the first time since 2007, joining the 3 month – 10-year spread in inversion territory.
• While an inverted yield curve does not guarantee recession, it has been reasonably accurate in the past and a reflection of the current state of uncertainty caused by the trade war.
• Attempting to counter economic weakness, the National Development and Reform Commission in China announced it intends to roll out a plan (no details yet) to boost China’s disposable income and spur consumption.
• In Europe, an interview with ECB policymaker Olli Rehn has created expectations that a “significant and impactful” stimulus package will be unveiled at the ECB’s meeting in September.
• In Australia, a stronger than expected jobs report could not prevent the ASX200 from falling -2.72% for the week to close at 6405.5.
• As disappointing earnings results from companies including Blackmores, Telstra and Woodside added to the prevailing offshore gloom.
• In FX, the AUDUSD closed the week unchanged as the better Australian jobs report helped to counter a generally stronger U.S dollar.

For the week ahead, the key events are:

Australia: RBA meeting minutes (Tuesday).

The earnings season continues this week with reports from 115 companies including BlueScope BHP, Brambles, Amcor, Qantas, Origin and South 32.

New Zealand: NZ Services PSI (Monday), Global Dairy Auction (Wednesday), retail sales (Friday).

China: Nothing of note.

Japan: Reuters Tankan index, balance of trade (Monday), flash PMI (Thursday), inflation (Friday).

U.S.: Existing home sales, FOMC meeting minutes, Markit flash PMI (Thursday), Jackson Hole Symposium.

• Jackson Hole Symposium:  The subject of this year’s annual central bankers’ Jackson Hole Symposium (22-24 August) is “Challenges for Monetary Policy”, which is likely to include a robust discussion on the threats to growth from the trade war and how best to respond.

Canada: Inflation (Wednesday), retail sales (Friday).

Euro Area: German PPI (Tuesday), German and EA Markit flash PMI (Thursday),

UK: Nothing of note.

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