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Global equity markets ended mostly weaker last week, amid global trade tensions and Turkish Lira crisis. UK markets ended the week in negative territory, as concerns over hard Brexit resurfaced among investors. On the macroeconomic front, UK’s average weekly earnings rose less than market expectations in the April-June 2018 period. Retail sales climbed more than expected on a monthly basis in July. Jobless rate unexpectedly dropped in the three months to June period, marking its lowest rate since February 1975. Additionally, the consumer price index (CPI) climbed in line with market forecast for first time since November 2017 on a yearly basis in July. Moreover, the annual producer price index (PPI) recorded a more-than-anticipated rise in July. European markets ended the week lower for the third consecutive week, on the back of weak commodity prices and Turkey’s currency crisis. Data indicated that the Eurozone’s industrial production fell more than market forecast on a monthly basis in June. Meanwhile, the region’s GDP rose more than market expectations on a quarterly basis in the second quarter of 2018. Additionally, the final CPI climbed in line with market forecast on an annual basis in July, recording its highest level since December 2012. The nation’s non-seasonally adjusted trade surplus widened in June. Separately, Germany’s quarterly GDP rose more-than-anticipated in 2Q18. Further, the CPI advanced at par with market forecast on an annual basis in July. US markets ended the week in green, amid optimism over US-China trade deal and upbeat economic data. Data indicated that the US small business optimism index unexpectedly rose in July, notching its second highest level in its history. Moreover, manufacturing production advanced meeting market anticipations for a consecutive second month in July, while monthly industrial production rose at a slower-than-expected pace in July. Additionally, advance retail sales rose more than market forecast on a monthly basis in July. Further, business inventories climbed in line with expectations in June. Also, both housing starts and building permits advanced in July. Moreover, the initial jobless claims unexpectedly eased last week. On the contrary, average hourly earnings recorded a drop on a yearly basis in July. Additionally, the Michigan consumer sentiment index unexpectedly eased in August. Asian markets ended weaker last week.

 
     

Currency Update

 


The EUR ended firmer against the USD, after the Eurozone’s economy expanded more than market forecast in 2Q18. The British Pound ended weaker against the greenback, amid rising worries that Britain would leave the European Union without a defined trading agreement. The US Dollar ended mostly weaker against its major counterparts last week, after news emerged that the US President, Donald Trump and Chinese leader, Xi Jinping would resume trade talks in November.

 
 

 

RBA Governor, Philip Lowe wants the nation’s currency to weaken further

 


In his semi-annual parliamentary testimony, the Reserve Bank of Australia’s (RBA) Governor, Philip Lowe stated that overall Australia’s economic growth of above 3%, inflation around 2% and unemployment below 5.5%, has continued to move in the right direction. Further, he added that he would prefer a weaker Aussie and expects record low interest rates “for a while yet”. However, he expressed concerns over global uncertainties.

 
 

 

The Week Ahead

 


Going ahead this week, investors will keep a tab on the FOMC meeting minutes, the US mortgage applications, initial jobless claims, new home sales, durable goods orders, house price index, the Markit manufacturing and services PMI along with the Eurozone’s construction output, consumer confidence index, Markit manufacturing and services PMI across the Eurozone for further indication. Additionally, UK public sector net borrowing and BBA loans for house purchase along with Germany’s PPI and GDP will pique significant amount of investor attention.

 
 

 
 

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