What mattered last week and a preview of the week ahead

What mattered last week:

  • Positive news flow continued last week with both China and the U.S. making trade war concessions which helped the S&P 500 close in on its July high.
  • The ECB announced significant monetary policy easing measures which exceeded all expectations, including QE to continue for as long as needed.
  • The removal of National Security advisor and policy hawk John Bolton goes some way to validating reports that President Trump was considering easing sanctions on Iran.
  • As the flow into risk assets gathered momentum, bond yields rallied strongly. The yield on U.S. 10-year treasury bond closing 33bp higher at 1.90%.
  • Gold closed the week -1.20% lower at U.S. $1488, dragging the Australian gold sector lower with it.
  • At the index level, the ASX200 closed the week 0.33% higher at 6670. Once again underperforming the S&P 500 which posted a 0.85% gain for the week.
  • In FX, the AUDUSD posted its third straight week of gains, finishing the week near .6880.

For the week ahead, the key events are:

Australia: RBA meeting minutes, house price index (Tuesday), labour force (Thursday).

  • RBA September minutes (Tuesday): The minutes are expected to affirm a clear easing bias remains in place.
  • August labour force (Thursday): After a strong rise of +41k in July, the market is looking for a deceleration in headline employment to +10k, while the unemployment rate is expected to tick up from 5.2% to 5.3%.

New Zealand: Global dairy price auction, Westpac consumer confidence and current account (Wednesday), Q2 GDP (Thursday).

China: Fixed asset investment, industrial production, retail sales (Monday), house price index (Thursday).

Japan: Balance of trade (Wednesday), BoJ interest rate decision (Thursday), inflation (Friday).

  • BoJ interest rate decision (Thursday): The BoJ is not expected to change monetary policy but is expected to remain dovish.

U.S.: Industrial production, capacity utilisation (Tuesday), housing starts and building permits (Wednesday), FOMC interest rate decision (Thursday), existing home sales (Friday).

  • FOMC (Wednesday): The market is pricing in a 97% chance of a 25bp cut to the Fed Funds rate to a range of 1.75% to 2.00%. The commentary is likely to be dovish keeping open prospects of another 25 bp cut before year-end.

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

Euro Area: German and EA ZEW economic sentiment (Tuesday), current account (Thursday), German PPI (Friday).

UK: Inflation (Monday), BoE interest rate meeting and retail sales (Thursday).

  • BoE interest rate meeting (Thursday): In their last scheduled meeting before Brexit October 31, the BoE is expected to keep interest rates on hold at 0.75%.


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