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Weekly market review

Week ending 9 September 2016


Equities

Central bank comments were the main drivers of stock markets once again last week. The Bank of England (BoE) governor Mark Carney’s firm standing, amid tough questioning from MPs on the Treasury Select Committee, forced a late UK stock market rally on Wednesday. However, Thursday’s European Central Bank (ECB) announcement, that interest rates would remain unchanged, contributed to a fall in European, UK and US stock markets - downward moves which were exacerbated on Friday when a Federal Reserve governor suggested the US would see interest rates rise sooner rather than later. This resulted in the US stock market suffering its biggest one day fall since June.

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Fixed income

A government bond sell-off, emanating from Europe, sent sovereign yields higher globally, after the ECB left interest rates unchanged. The German 10-year Bund yield rose above zero for the first time since June and US 10-year treasury bond yields also hit their highest level over the same period.

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Currencies

The pound ended the week pretty much flat against the US dollar, but fell against the euro after the ECB decision to keep interest rates unchanged. The US dollar Index posted its worst single-day performance since July on Tuesday, falling 1% on the heels of weak non-manufacturing data. But by Friday, it had recovered slightly as investors reacted to late-week policy reassessments. The Japanese yen rose versus the dollar to ¥102.70.



Commodities

The biggest crude oil inventory drop in 17 years helped West Texas Intermediate crude oil rise 2.6% to $45.88/barrel, though the drop in inventories is likely a one-off result of Tropical Storm Hermine’s production disruptions. Doubts over an OPEC (Organisation of Petroleum Exporting Countries – a union of oil-producing countries that regulate the amount of oil each country is able to produce) agreement to freeze production continue as a counterweight to any short-term pricing pressures.

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