What happened last week:
- A 5th straight week of gains for the S&P500 as it ended 3.30% higher, supported by positive news about a coronavirus vaccine and the Fed’s shift to inflation average targeting.
- The Feds decision to inflation targeting was announced in a speech by Fed Chair Powell at the Jackson Hole Symposium and will allow the Fed to keep rates at near zero for a longer period without having to raise rates to pre-empt inflation.
- New coronavirus cases fell in the U.S, Japan, and Australia although the number of new cases in Europe is rising.
- Economic data in the U.S was varied. Durable goods, personal spending and personal income were higher than expected. However, consumer confidence dropped to its lowest level since 2014.
- Japanese PM Abe resigned from his position due to health reasons catching the market by surprise on a Friday afternoon.
- Volatility, as measured by the VIX index, ended slightly firmer at 23.0.
- S. 10-year yields rallied by 10bp to 0.73%.
- Gold ended firmer at U.S $1965 from U.S $1940 the previous week.
- A fourth straight week of profits for crude oil to ended 1.50% higher, at U.S $42.97/bbl.
This week’s key Economic Data announcements
• New Zealand ANZ Business confidence
• Japan Industrial production
• Japan retail sales
• Japan consumer confidence
• Australia Private sector credit
• Australia business inventories
• Australia company gross profits
• China NBS manufacturing
• China non-manufacturing PMI
• Canada Building permits
• German inflation
• New Zealand building permits
• New Zealand terms of trade
• German and EA unemployment
• Japan unemployment
• US. ISM manufacturing PMI
• Australia building permits
• Australia current account
• Australia RBA interest rate meeting
• China Caixin manufacturing PMI
• Canada Markit manufacturing PMI
• EA inflation
• Australia Q2 GDP
• UK Nationwide housing prices
• EU German retail sales
• Australia balance of trade
• China Caixin services
• China composite PMI
• Canada balance of trade
• US. factory orders
• US. balance of trade
• US. initial jobless claims
• US. ISM non-manufacturing
• EA retail sales
• Australia retail sales
• US. Non-farm payrolls
• Canada employment
• UK construction PMI
• US. non-farm payrolls
• German factory orders and construction
Points worth mentioning:
The Australian Central Bank this week is expected to make no change to its current monetary policy settings including leaving the targets for the cash rate and the yield on 3-year Australian Government bonds at 25 basis points.
On Friday in the U.S, the Non-farm payrolls are expected to have a 1.5 million gain in payrolls in August and the unemployment rate to fall by to 9.9%.