Shares in Europe were little changed, as investors evaluated signs of slowing economic growth. In local currency terms, the pan-European STOXX Europe 600 Index ended the week roughly flat. Major indexes were mixed. Germany’s Xetra DAX Index fell 0.45%, while Italy’s FTSE MIB Index gained 0.22%. France’s CAC 40 Index and the UK’s FTSE 100 Index were almost flat.
Core eurozone government bond yields rose on higher-than-expected eurozone inflation and aggressive commentary from some ECB policymakers, who called for a reduction in the purchase pace of the Pandemic Emergency Purchase Program. Peripheral eurozone and UK government bond markets mostly tracked core markets.
Eurozone inflation accelerated more than forecast to 3% in August, up from 2.2% in July, and well above the ECB’s 2% target. Higher energy, food, and industrial goods prices drove the rise, according to the EU’s statistics agency.
The major US indexes ended the week mixed after the S&P MidCap 400 Index joined the S&P 500 and Nasdaq Composite indexes to reach new intraday highs on Thursday. The small real estate sector outperformed within the S&P 500, while financials lagged. Trading volumes were generally subdued during what is widely considered the last week of the summer vacation season. Markets were scheduled to be closed the following Monday in observance of Labor Day.
The jump in hourly earnings appeared to spur inflation fears and an increase in the benchmark 10-year U.S. Treasury note yield on Friday morning, leaving it modestly higher for the week. (Bond prices and yields move in opposite directions.) The broad municipal bond market was little changed throughout the week and underperformed Treasuries.
News of Prime Minister Yoshihide Suga’s resignation resulted in a strong rally in Japanese equities, removing political uncertainty and elevating expectations of increased economic stimulus. Japan’s accelerating COVID-19 vaccination drive underpinned gains. The Nikkei 225 Index soared 5.38%, while the broader TOPIX Index rose 4.49%, reaching a 30-year-high.
The yield on the 10-year Japanese government bond rose to 0.04% (from 0.02% at the end of the previous week), while the yen weakened slightly to JPY 109.98 against the U.S. dollar (from 109.83 the prior week).
Chinese stocks climbed for a second consecutive week. The Shanghai Composite Index gained 1.7% and outperformed the large-cap CSI 300 Index, which rose 0.3%, according to Reuters. On Thursday, President Xi Jinping announced the launch of a new stock exchange in Beijing.
The new exchange focuses on providing equity financing for small and mid-size enterprises, and reflects China’s strong commitment to its capital markets. News of the new stock market comes as many foreign investors have grown more wary of investing in Chinese assets following a regulatory clampdown on many industries.
The yield on the 10-year Chinese government bond fell four basis points to 2.85%. The Renminbi currency appreciated 0.5% against the U.S. dollar to 6.451.
Friday’s weak US jobs report for August naturally showed renewed interest in gold, helped weaken the US dollar, and sparked delight among many investors that the free money from the Fed and other central banks will continue for a while longer.
Gold for September delivery rose $14.30 an ounce, or 0.8% to $1830.90. Oil fell on Friday, as it became clear that Ida had not badly damaged the Gulf of Mexico production and processing facilities.
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Lawsons Equity Limited is a company registered in Malta with company number C49564 and Licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994. Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here
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