Asian markets mostly took their cues from Wall Street during the week, although Chinese shares sold off heavily nearly all week as investors remain concerned about a lack of liquidity in Chinese markets. There was also selling related to the upcoming Chinese Lunar New Year, with investors taking profits and getting out of positions before the holiday shuts Chinese markets for a full week. The Shanghai Composite led losses for the region, falling 9.9% for the week, but the Hang Seng in Hong Kong wasn’t far behind as it lost 9.8% for the week. Japan’s Nikkei ended the week 8.3% lower as safe haven flows into the Yen weighed on equities. Australia’s S&P/ASX 200 fell 4.7% for the week, outperforming the region, and the Kospi in South Korea ended with a 6.5% weekly loss.
With Wall Street rebounding on Friday we could also get a bounce across much of Asia to open the week, but volatility remains high, and the rest of the week could see heavy losses again. Chinese shares will be especially vulnerable to drops, as the Chinese Lunar New Year will begin on Thursday, and markets will be closed from then until the following Thursday. Look for investors on the mainland especially, but also in Hong Kong, to continue profit taking and going flat ahead of the holiday.
European markets fell for most of the week as well, but were saved from greater losses by a mid-week rally. Friday also saw shares rallying early, but a drop on Wall Street early in its session caused European equities to finish in the red as well. European markets have now fallen for nine of the past ten sessions. The pan-European Stoxx Europe 600, the broadest measure of European equities, ended the week with a 5.1% loss, while Germany’s DAX and the CAC 40 in France were both 5.4% lower on the week. In London the FTSE outperformed the region as it fell just 4.8% for the week.
With European markets falling for so long they look overdue for a rebound, but that could be halted by weakness from U.S. equities. One positive for European equities right now is the weakness in the Euro and Pound against the U.S. dollar. That didn’t help equities much in the past week, but it could help lift markets faster when a recovery begins to take hold. There isn’t much in the way of economic data for the European Union this coming week, so it will be very dependent on the U.S. lead, but British investors will have key inflation data to contend with on Tuesday, and if there are signs of inflation heating up in the U.K. it could be a bad week for the FTSE.
With volatility jumping to a three year high and continued worries over rising U.S. inflation, markets in the U.S. suffered a very choppy week. Quick and violent reversals were featured in many sessions, with Wednesday seeing markets make their largest reversal in three years, erasing early gains and ending lower. Monday saw the Dow suffer its worst one-day point drop in history, and Thursday looked like a repeat as the Dow suffered its second largest point drop in history. Those losses were moderately offset by solid gains on Tuesday and Friday, but the S&P 500 and Dow were still 5.1% lower for the week, while the Nasdaq had a 5% weekly loss.
The week starts off quietly enough on the economic data front, which could give markets a chance to stabilize, especially after the strong finish on Friday. However, Wednesday’s CPI data and Thursday’s PPI data could throw markets back into a tailspin if they come in hotter than expected. Caution will likely be the keyword ahead of these data points, so we could get a flat start to the week as investors stay on the sidelines, or could see the rout in equities continue if investors decide to get out of equities ahead of the CPI and PPI data.
Precious metals fell for most of the week, posting losing sessions in five of the past six sessions. Gold was down 1.6% on a weekly basis, and silver lost 3.4% for the week. With the stronger U.S. dollar and rising bond yields, precious metals could continue to suffer as investors move into assets providing greater yields. Gold is sitting roughly 0.5% above a $1,310 support level, and if that is broken we could see gold slip below the $1,300 level for the first time in 2018. Crude oil was also weak due to the stronger U.S. dollar, and on concerns over rising U.S. inventory levels and historically high U.S. crude production. The WTI contract fell under $60 for the first time in 2018, and had a weekly loss of 9.6%, its worst weekly performance since January 2016.
|All Day||JPY||Bank Holiday|
|09:50||GBP||MPC Member Vlieghe Speaks|
|16:30||GBP||MPC Member McCafferty Speaks|
|21:50||AUD||RBA Assist Gov Ellis Speaks|
|00:30||AUD||NAB Business Confidence|
|09:30||GBP||PPI Input m/m|
|13:00||USD||FOMC Member Mester Speaks|
|23:30||AUD||Westpac Consumer Sentiment|
|07:00||EUR||German Prelim GDP q/q|
|08:00||EUR||German Buba President Weidmann Speaks|
|10:00||EUR||Flash GDP q/q|
|13:30||USD||Core CPI m/m|
|13:30||USD||Core Retail Sales m/m|
|13:30||USD||Retail Sales m/m|
|15:30||USD||Crude Oil Inventories|
|All Day||CNY||Bank Holiday|
|13:30||CAD||ADP Non-Farm Employment Change|
|13:30||USD||Core PPI m/m|
|13:30||USD||Empire State Manufacturing Index|
|13:30||USD||Philly Fed Manufacturing Index|
|14:15||USD||Capacity Utilization Rate|
|14:15||USD||Industrial Production m/m|
|18:30||CAD||Gov Council Member Schembri Speaks|
|22:30||AUD||RBA Gov Lowe Speaks|
|All Day||CNY||Bank Holiday|
|09:30||GBP||Retail Sales m/m|
|13:30||CAD||Foreign Securities Purchases|
|13:30||CAD||Manufacturing Sales m/m|
|13:30||USD||Import Prices m/m|
|15:00||USD||Prelim UoM Consumer Sentiment|