Alquity global investment management market update: 10 to 16 September

10 to 16 September: Can a Goldilocks market return?

Risk aversion in global markets faded by the end of the week, due to several coinciding factors:

Trade tensions eased, as the US and China signalled that they might (or might not) continue negotiations on tariffs and the conduct of international trade.
The release of lower-than-expected CPI inflation in the US implied that current inflationary developments in the US do not call for aggressive monetary tightening by the Federal Reserve, which in turn depreciated the USD compared to the beginning of the week.
Sentiment was lifted by interest rate hikes carried out by the Turkish and Russian central banks that helped the recovery of both nation’s currencies.

Looking ahead

All eyes remain on the US and China and whether the administrations of the two countries will continue trade discussions. The economic diary for developed markets is relatively light this week, as neither major policy events nor highly relevant macroeconomic data are scheduled. In the Euro Area, the event of greatest market-moving potential will be a speech delivered by ECB President Mario Draghi, who may provide further colour on the reaction function of the ECB’s decision-making body. The Japanese counterpart of the ECB holds its usual rate setting meeting on Wednesday, where the MPC is unlikely to change the course of monetary policy. In the US, data releases will be scarce, since only the current account balance and PMI figures will be revealed. However, both are unlikely to drive markets.

The Asian economic calendar is almost completely empty, since the Thai central bank’s monetary policy meeting and Malaysian inflation from August bear the potential to have an impact on financial markets. Latin American markets will continue to focus on the political polls and related news flow in Brazil. In addition, the Brazilian central bank is scheduled to hold a rate setting meeting, where no rate moves are expected. Argentina will release Q2 GDP figures, which are likely to reflect the underlying weakness of the Argentine economy. At the end of the week, South Africa releases inflation figures, which will be followed be the monetary policy decision of the South African central bank.