Asian markets suffered a downturn in the past week, hurt by the continued weakness of the U.S. dollar as well as signs that growth in the Chinese economy could be slowing. Mainland China’s Shanghai Composite suffered the worst drop, falling for four out of five sessions and ending with a 2.7% weekly loss. The weakness on mainland China bled into Hong Kong as well, leading to a 1.7% loss for the Hang Seng, which previously had been one of the best performing global markets. South Korea’s Kospi ended the week 1.9% lower, with most of the loss coming in the final trading session of the week. Japan’s Nikkei continued to struggle with the strong Yen, although a strong rally on Thursday kept the index to a 1.5% weekly loss. The one bright spot in the region was the S&P/ASX 200 in Australia, which finished the week with a 1.2% gain thanks to strength from the energy and commodity sectors.
The coming week should be better for Japan’s Nikkei as the Yen was steadily softer against the U.S. dollar late in the previous week. Australia’s S&P/ASX 200 can also be expected to continue higher as crude and metals prices should remain strong, and Australian banks are looking ready to recover in response to rising global interest rates. Chinese markets are always difficult to gauge, but a good reading Monday from the Caixin Services PMI could help turn around the weakness in the previous week. Friday will be a test however as the official Chinese PMI data will be released. As the mainland goes, so too will Hong Kong. South Korea’s Kospi could also continue to lag as Samsung has been struggling with a slowdown in demand for its products.
European markets got off to a poor start last week due to the continued weakness of the U.S. dollar, and saw losses accelerate late in the week as global bond yields began climbing to their highest levels in several years. With investors spooked by the rising bond yields, markets dropped, and European indices saw losses all week, with Friday capping off the bad week with a sharp decline across the board. The pan-European Stoxx Europe 600 had a 3.2% weekly loss after suffering its worst daily decline since September 2016 on Friday. Germany’s DAX put together two back-to-back sharp losses to finish the week lower by 4.2%, its worst weekly loss since February 2016. The CAC 40 in France was also down 3.0%. London’s FTSE didn’t escape the carnage as it fell for four consecutive sessions to book a 2.9% weekly decline.
The coming week could see a rebound as the U.S. dollar has been strengthening, and that should help European equities. The big question though will be bond yields. If they keep rising we could see more sharp declines for European equities, despite weakness from the Euro and Pound. We will also get the latest monetary policy statement from the Bank of England on Thursday, but there is no change expected from the central bank at this time.
U.S. markets fell sharply in the past week, with the decline beginning at the start of the week, and concluding with a sharp drop on Friday. The fall saw the S&P 500 losing 3.9% for the week, while the Nasdaq suffered a 3.6% weekly loss. The worst hit however was the Dow, which was down 4.2% on a weekly basis, the worst weekly loss for the index since January 2016. Investors are worried that global inflation is heating up, which could lead to an investment shift from stocks to bonds.
The cryptocurrency markets took a solid hit this past week, with nearly every coin suffering a major loss. Bitcoin ended the week below the $9,000 level, while Ethereum finished below the $900 level. Since the beginning of January Bitcoin is down more than 40%; and while Ethereum had been up by nearly 40% at one point, its more than 13% loss on Friday took it back to the same level it had been at on January 1 of this year.
While it appears that the market should find a bottom soon as it is down more than 40%, past bear markets in cryptocurrency has shown us that Bitcoin and other cryptos can fall much further than expected. At this point we would expect there to be a hard floor at the $5,000 level for Bitcoin; but since there hasn’t been any strong catalyst for this continued selloff, we also can’t say what might finally put a halt to the slide lower in this entire asset class.
|01:45||CNY||Caixin Services PMI|
|09:00||EUR||Final Services PMI|
|09:30||EUR||Sentix Investor Confidence|
|14:45||USD||Final Services PMI|
|15:00||USD||ISM Non-Manufacturing PMI|
|00:30||AUD||Retail Sales m/m|
|03:30||AUD||RBA Rate Statement|
|09:00||EUR||German Buba President Weidmann Speaks|
|08:30||GBP||Halifax HPI m/m|
|13:30||CAD||Building Permits m/m|
|15:30||USD||Crude Oil Inventories|
|20:00||NZD||Official Cash Rate|
|20:00||NZD||RBNZ Monetary Policy Statement|
|20:00||NZD||RBNZ Rate Statement|
|21:00||NZD||RBNZ Press Conference|
|00:30||AUD||NAB Quarterly Business Confidence|
|05:00||JPY||Economy Watchers Sentiment|
|08:45||EUR||German Buba President Weidmann Speaks|
|09:00||AUD||RBA Gov Lowe Speaks|
|12:00||GBP||BOE Inflation Report|
|12:00||GBP||MPC Official Bank Rate Votes|
|12:00||GBP||Monetary Policy Summary|
|12:00||GBP||Official Bank Rate|
|12:00||GBP||Asset Purchase Facility|
|12:00||GBP||BOE Inflation Letter|
|12:00||GBP||MPC Asset Purchase Facility Votes|
|17:45||CAD||Gov Council Member Wilkins Speaks|
|00:30||AUD||RBA Monetary Policy Statement|
|09:30||GBP||Manufacturing Production m/m|
|09:30||GBP||Goods Trade Balance|