Weekly Market Review - August 19-23

As of late Friday, the US dollar tumbled against the euro and other major currencies as the US-China trade conflict re-escalated to new levels. The EUR/USD pair rose over 0.5% over the week.

The British pound is losing strength against the European currency as investors are worried about the Brexit uncertainty after Boris Johnson became Prime Minister.

In the cryptocurrency market, Bitcoin’s volatility has been almost invisible as the coin has fluctuated around the $10,000 level.

Here are the most important economic updates for the week ended August 23:

Macroeconomic News

US Manufacturing Has Worst Performance in a Decade

US manufacturing sector might have its first month of negative performance in almost ten years, as factories worry about the Sino-US trade war and a potential economic recession. On Thursday, IHS Markit said that its preliminary index of US factory activity declined to 49.9 in August, which is the lowest reading since September 2009. In July, the final indicator was 50.4. Any figure below 50 suggests a contraction in manufacturing. The index on new orders for US goods declined to 49.5.

Japan’s Exports Fell 1.6% in July

Japan’s exports declined for the eighth month in a row in July. On Monday, the Ministry of Finance reported that exports fell 1.6% in July compared to the same period of 2018. The reading was negatively influenced by China-related exports of auto parts and semiconductor production equipment. Nevertheless, analysts expected a 2.2% decline for last month. Export volume increased by 1.5% in July in annual terms, which is the first positive result in nine months.

CBI’s UK Retail Sales Measure Shows Second-Worst Result Ever

UK retail sales tumbled at an accelerated pace this month, according to the Confederation of British Industry (CBI). The organisation said on Thursday that its gauge of retailers fell to -49 in August compared to -16 last month, which is the second-worst performance in the index’s history since 1983. Economists polled by Reuters expected a reading at -11. However, official retail sales indicators aren’t as dramatic as those provided by private surveys. Still, British consumers are concerned about Brexit and might try to focus on saving rather than spending.

US Jobless Claims Fall More Than Expected

The number of US citizens applying for unemployment benefits declined last week, pointing to a strong labour market despite recession concerns and a decline in the manufacturing sector. On Thursday, the Labor Department said that first-time jobless claims fell last week by 12,000 to a seasonally adjusted 209,000. Analysts expected a decline to 216,000. The four-week moving average, which is regarded as a more accurate measure of labour market mood, rose 500 to 214,500 last week.

US Home Sales Increase on Lower Mortgage Rates

US home sales benefits from lower mortgage rates and beat expectations in July. The National Association of Realtor reported that existing home sales expanded by 2.5% to 5.42 million units. June data was revised upward to reflect a reading of 5.29 million units from the initially reported 5.27 million units. Thus, the US housing market seems to maintain momentum despite fears of a global economic recession. Analysts surveyed by Reuters expected existing home sales to increase to 5.39 million units last month.

Japan’s Manufacturing Remains Negative For 4th Straight Month

Japan’s manufacturing activity tumbled for the fourth month in a row in August, driven by the poor performance of export orders. On Thursday, the Jibun Bank Flash Japan Manufacturing Purchasing Managers' Index (PMI) increased to 49.5 in August from July’s 49.4. However, the indicator is still below the 50 level, which suggests a contraction. On the other side, services sector activity accelerated at the fastest pace in about two years, pointing to strong domestic demand.

Upcoming News to Watch

On Monday, the UK markets will be closed in observance of the Summer Bank Holiday.

Several important economic updates will come from the eurozone and several European countries. Thus, Germany is scheduled for Tuesday to report on its economic growth for the second quarter. The largest European economy will also report on its inflation and unemployment on Thursday. Elsewhere, France will publish consumer spending and Q1 GDP data. On Friday, the eurozone and France will release inflation data.

The US will report on its core durable goods on Monday. On Thursday, the world’s largest economy will release data on GDP growth, jobless claims, and pending home sales, among others.

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