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Global equity markets ended firmer last week, amid easing trade war fears between the US and China and amid positive economic developments. UK markets ended in positive territory. On the data front, UK's BBA mortgage approvals recorded an unexpected drop in July. Further, public sector net borrowing posted a more-than-anticipated surplus in the same month. European markets ended the week on a positive footing, after the European Central Bank’s (ECB) July meeting minutes reported that the Eurozone’s economy remains on track to reach its inflation target. Data indicated that the Eurozone’s Markit services PMI rose at par with market forecast in the August. Additionally, construction output climbed for a third consecutive month on a monthly basis in June. On the other hand, the region’s Markit manufacturing PMI unexpectedly dropped in August, recording its lowest level since May 2017. Additionally, the consumer confidence index declined more-than-expected in August. Separately, Germany’s gross domestic product (GDP) rose in line with market expectations on a quarterly basis in the second quarter of 2018. Additionally, the producer price index (PPI) rose in line with market expectations on an annual basis in July. Moreover, the Markit services PMI advanced more-than-anticipated in August. Meanwhile, the nation’s Markit manufacturing PMI dropped more than expected in August. US markets ended the week in green, after the US Federal Reserve’s (Fed) August monetary policy meeting minutes signalled at possible interest rate hike in September and following positive comments from Fed Chairman, Jerome Powell. On the macroeconomic front, the US initial jobless claims unexpectedly dropped for a third consecutive week in the week ended 18 August 2018. Additionally, the MBA mortgage applications rebounded in the week ended 17 August 2018. Further, the house price index rose less than market expectations on a monthly basis in June. In contrast, the nation’s Markit manufacturing PMI registered a more-than-expected fall in August, marking its lowest reading since November 2017. Additionally, the Markit services PMI dropped more than market forecast to a nine-month low level in the same month. Preliminary durable goods orders slid on a monthly basis in July, more-than-expected. Moreover, both, new home sales and existing home sales fell in July. Asian markets ended firmer last week, tracking gains in their US counterparts.

 
     

Currency Update

 


The EUR ended firmer against the USD, after Germany’s economy expanded as expected in the second quarter of 2018.
The British Pound fell against the EUR last week, on Brexit concerns.
The US Dollar ended mostly weaker against its major counterparts last week, after the US Fed Chairman, Jerome Powell indicated that the central bank has no intention to raise rates at a faster pace and hence would stick to its gradual approach.

 
 

 

FOMC Minutes: Fed maintains gradual rate hike policy and signals trade war uncertainty

 


The Federal Reserve, in its latest monetary policy meeting minutes, indicated that further gradual increases in the target range for the federal funds rate would be consistent. The officials stated that the US GDP growth would slow in the second half of 2018 but remain above potential. Further, the members pointed that ongoing global trade tensions posed a biggest threat to otherwise strong US economic growth.

 
 

 

The Week Ahead

 


Going ahead this week, investors will keep a tab on the US GDP, advance goods trade balance, consumer confidence index, MBA mortgage applications, initial jobless claims and the Michigan consumer sentiment index along with the UK’s net consumer credit and GfK consumer confidence index for further indication. Additionally, the Eurozone’s CPI, consumer and economic confidence index and unemployment rate along with Germany’s CPI, GfK consumer confidence index and unemployment rate will attract significant investor attention.

 
 

 
 

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