Asian markets had a good week overall, with the rally in crude providing a good backdrop, but markets mixed throughout the week as they responded to domestic issues as much as global issues. The Hang Seng in Hong Kong easily outperformed in the region, rising for a fifth consecutive week and tacking on an impressive 4.1%. Mainland China’s Shanghai Composite also saw solid weekly gains of 2.4% as trade worries receded into the background. Australia was able to extend its rally, climbing 0.9%, and South Korea’s Kospi edged up by 0.7% for the week. In Japan, the Nikkei finished with a 1.3% weekly gain, but trading was a bit odd as the equity market ignored moves in the Yen most of the week.
Japan and Australia will see the most economic data released in the coming week, and so stand the greatest chance of some volatility on surprise results. Mainland China and Hong Kong should be expected to continue their rallies, unless trade and tariff issues somehow come back into the picture. Hong Kong’s rally is also vulnerable to increased U.S. dollar strength, so that will have to be kept in view. Australia’s rally could face a pullback as the S&P/ASX 200 approaches a 10-year high. South Korea’s underperformance has been a surprise given the potential peace coming with the North, and we think at some point that market will break out in a peace rally.
European markets continued higher in the past week, with the Stoxx Europe 600 and FTSE 100 both posting a seventh consecutive weekly advance. It was the longest such streak for the Stoxx Europe 600 in three years, as it gained 1.4% for the week. London’s FTSE did even better, gaining 2.1% even though the week was shortened by a public holiday on Monday. Additionally, the seven consecutive weekly wins for the FTSE is the longest streak of weekly advances in 12 years. Rounding things out, the DAX in Germany added 1.4% and the CAC 40 in France underperformed with a 0.5% gain.
The coming week should see more upside as the Euro and Pound remain weaker versus the U.S. dollar. As long as that trend remains intact we can expect upside for European equities as the multi-nationals benefit from weaker national currencies. The political situation in Italy has begun to weigh later in the past week, but investors seem more used to the idea of a euroskeptic coalition for Italy, and political issues could become a non-factor in the coming week.
U.S. markets finished a strong week on a tepid note, as investors ran out of reasons to buy equities heading into the weekend. Major U.S. indices still outperformed most global markets, with the Dow moving back into positive territory for the year as it gained 2.2%, but the S&P 500 performing better with a 2.4% gain, while the Nasdaq outperformed as it gained 2.7% after rising for five straight sessions.
The relative weakness on Friday could extend into Monday, as there is no economic data due out to provide a catalyst for additional moves higher. Earnings season is winding down as well, although earnings reports from Agilent on Monday, Cisco on Wednesday, Applied Materials on Thursday or Deere on Friday could provide a catalyst for sector specific moves. The U.S. dollar is another question mark as the recent strength hasn’t weighed on equities yet, but further strength could provide a headwind for equities. One positive has been the recent downtick in volatility, which could see markets continuing to climb steadily higher.
Gold fell on four of the five sessions this past week, but still managed a roughly 0.5% weekly gain as it advanced strongly Thursday following the weakness of the U.S. dollar in response to soft consumer inflation data. The yellow metal has been holding quite well above the $1,310 level, and it continues to provide solid support. The coming week isn’t likely to see anything change much, so small moves in a tight range is the expectation.
Crude ended the week on a down note, but the gains made on the U.S. leaving the Iran Nuclear Pact and re-introducing sanctions against the Middle-Eastern state were enough to see crude advance for a second consecutive week. The U.S. WTI contract added 1.9%, while the international benchmark Brent crude gained 3.3%. The upcoming week is likely to continue to see prices driven by speculation over the impact sanctions on Iran will have on global crude supplies. This should give an upside bias, but crude prices are extended pretty high already, which could act as a cap on gains.
|14th-18th||CNY||Foreign Direct Investment ytd/y|
|00:10||AUD||RBA Assist Gov Debelle Speaks|
|00:30||AUD||Monetary Policy Meeting Minutes|
|02:40||AUD||RBA Assist Gov Debelle Speaks|
|03:00||CNY||Fixed Asset Investment ytd/y|
|03:00||CNY||Industrial Production y/y|
|07:00||EUR||German Prelim GDP q/q|
|09:30||GBP||Average Earnings Index 3m/y|
|09:30||GBP||Claimant Count Change|
|10:00||EUR||Flash GDP q/q|
|10:00||EUR||German ZEW Economic Sentiment|
|10:00||GBP||Inflation Report Hearings|
|13:30||USD||Core Retail Sales m/m|
|13:30||USD||Retail Sales m/m|
|13:30||USD||Empire State Manufacturing Index|
|00:50||JPY||Prelim GDP q/q|
|01:30||AUD||Westpac Consumer Sentiment|
|02:30||AUD||Wage Price Index q/q|
|10:00||EUR||Final CPI y/y|
|13:30||CAD||Manufacturing Sales m/m|
|14:15||USD||Capacity Utilization Rate|
|14:15||USD||Industrial Production m/m|
|15:30||USD||Crude Oil Inventories|
|17:00||CHF||SNB Chairman Jordan Speaks|
|03:00||NZD||Annual Budget Release|
|13:30||CAD||Foreign Securities Purchases|
|13:30||USD||Philly Fed Manufacturing Index|
|00:30||JPY||National Core CPI y/y|
|07:00||EUR||German PPI m/m|
|13:30||CAD||Core Retail Sales m/m|
|13:30||CAD||Common CPI y/y|
|13:30||CAD||Median CPI y/y|
|13:30||CAD||Retail Sales m/m|
|13:30||CAD||Trimmed CPI y/y|