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Weekly market review

Week ending 26 August 2016


US stock markets fell to a three week low following Federal Reserve Chairwoman Janet Yellen’s speech at Jackson Hole, in which she said the case for an interest rate hike has strengthened in recent months. Investors seem concerned about the potential for a rate increase in 2016. The UK stock market struggled during the week as pharmaceutical stocks contributed to its fall, as well as anxiety over Yellen’s announcement. Elsewhere, the Eurostoxx 600 edged up 1.1%, while the Japanese TOPIX index fell as investors remained risk averse amid deflationary worries.

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Fixed income

Yellen’s remarks helped push the US 10-Year Treasury yield to the top of the 1.5-1.6% band it has wavered between this month, as traders have held off on aggressive positioning in search of more certainty around the path of interest rates. The UK 10-year government bond yield remained flat, while in peripheral Europe, concerns around a sovereign rating downgrade in Portugal sent its 10-Year yield to 3.04%.

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A quiet week for currencies was interrupted on Friday as the US dollar index broke out of its range following the Jackson Hole speech, to end up 0.6%. The pound extended its rally into a second week, grinding out another 0.4% against the dollar as the second estimate of 2016’s second quarter economic growth offered no surprises. The euro and Japanese yen respectively depreciated 1.2% and 1.6% versus the dollar, with much of the losses coming from Friday’s trading.


West Texas Intermediate Crude Oil traded lower on the week at $47.6/barrel off the back of diminished expectations for an oil production cut, following comments made by the Saudi Arabian Energy Minister. Most market participants do not believe that next month’s OPEC meeting will lead to a production freeze, since OPEC members are concerned about relative market share.

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Where to next?

Source: Goldman Sachs Asset Management. Adapted by FundCalibre. This material is for information purposes only and does not in any way constitute financial advice.