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Weekly market review

Week ending 7 October 2016


Equities

The US stock market finished the week little changed after Friday’s US jobs report firmed market expectations for a potential Federal Reserve (Fed) interest rate move in December. Earlier in the week, US company stocks sold off but recouped losses after a European Central Bank (ECB) official denied rumours of a possible reduction in bond purchases. In Europe, the STOXX 600 index finished down 0.9%, while the UK stock market edged up slightly as mining stocks benefited from a weaker pound.

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Fixed income

The massive sterling 'flash crash' on Friday last week resulted in UK 10-year government bonds experiencing their biggest weekly loss in over a year, leading to yields reaching their highest level since June. US 10-Year Treasury bond yields rose to 1.73%, reflecting how the increase in unemployment negatively reaffirmed Federal Reserve policy expectations. The German Bund yield hovered around zero as upward pressure from US Treasuries counterbalanced cautious ECB minutes. In the midst of the Bank of Japan’s yield curve control policy, the 10-Year Japanese bond yield edged up slightly to -0.06%.

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Currencies

The British pound experienced something of a flash crash early Friday, dipping briefly beneath $1.19 before ending the week down 4.2%. Technical factors appeared to drive the drop, which comes amid fresh discussion of Brexit’s implications. The US dollar Index gained 1.2%, as manufacturing and services rebounded in September. The dollar has risen alongside increased interest rate hike expectations.



Commodities

West Texas Intermediate crude oil surged above $50/barrel to a 4-month high, extending its 7-day rally after US oil inventories unexpectedly fell by 3 million barrels, in sharp contrast to market expectations of a 1.5 million barrel build-up in inventory.

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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.