Weekly market summary
Europe shows signs of increasing pace in inflation amid worsening economic expectations. August’s preliminary inflation data projects core inflation to grow to 4.3% y/y from July’s 4.0% and headline – to 9.1% y/y from July’s 8.9%. Meanwhile, economic sentiment index in Eurozone is down more than expected to 97.6 from July’s 99. The fall is mainly attributed to a sharp 65% m/m reduction in industrial sentiment, which is the largest component of the aforementioned index. In contrast, consumer confidence improved in August.
US unemployment increases for the first time since March, a surprise result preceded by improved consumer confidence. In August, non-farm payrolls were reported at 315K, significantly down from July’s 526K, increasing the unemployment rate to 3.7% from July’s 3.5%. Moreover, factory orders entered the contraction zone for the first time in 18 months, being down 1% m/m.
Conversely, ISM Manufacturing PMI, which was forecasted to fall, stayed at 52.8 in August. Generally, a PMI figure above 50 indicates expansion trend. Adding to the positive news, consumer confidence showed a higher-than-expected increase to 103 from July’s 95. This can in partly be due to steadily growing average hourly earnings.
Importantly, markets are still responding unconventionally to macroeconomic news, interpreting positive data releases as a fuel for Fed’s hawkishness, while cheering negative news in hopes of less aggressive future monetary policy.
