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Weekly market review

Week ending 16 September 2016


Equities

The US stock market continued last week's volatile trading, but ended the week flat as investors digested mixed signals from Federal Reserve (Fed) officials. The UK stock market ended down 1.0%, falling for a second consecutive week, in spite of positive August data and relatively neutral Bank of England (BoE) meeting minutes, as news of the US Department of Justice’s demand for $14bn from Deutsche Bank for mis-selling prior to the financial crisis rocked UK banking stocks. Meanwhile, the Japanese Topix index fell 2.4% as investors remain focused on a potentially significant monetary policy assessment from the Bank of Japan (BoJ) on Tuesday.

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Fixed income

The global bond sell-off took a breather as expectations for tighter monetary policy, which would reduce spending in the economy, cooled. The US 10-Year Treasury bond yield was about flat by the close of the week, as weaker economic data was viewed as all but nullifying the chance of a September interest rate hike. In Europe, both the Swiss National Bank and the Bank of England (BoE) held policy steady, which kept a late-week rally in sovereign yields in check. The 10-Year Japanese bond yield fell as reports suggested the BoJ may take a more favorable stance toward negative rates than markets originally anticipated.

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Currencies

The US dollar rose 0.6%, boosted by stronger-than-expected Consumer Pricing Index (CPI - the weighted average price of a basket of consumer goods and services) data. The euro came under pressure following the US CPI release. Despite the BoE keeping rates on hold, the pound lost ground on other major currencies as traders priced in the likelihood of a future interest rate cut.



Commodities

West Texas Intermediate crude oil ended the week down 6.2% and slid to a 1-month low. Brent oil was also down 4.7%, capped by volatile Tuesday trading, after OPEC (Organisation of Petroleum Exporting Countries – a union of oil-producing countries that regulate the amount of oil each country is able to produce) reduced its forecast, signalling that the global oil glut may persist for longer than previously expected.

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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.