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Weekly Market Review - August 5-9
This week has been quite agitated amid the intensifying tensions between China and the US. Last week. Trump threatened that the US would impose an additional 10% tariff on more Chinese goods. China’s central bank devalued the national currency as a response, with the USD/CNY pair increasing above the 7.00 level.
The Japanese yen has been among the best performers of the week, gaining 1.07% against the US dollar and 0.10% against the euro. The Japanese currency was supported by an unexpected acceleration in GDP growth.
In the crypto market, Bitcoin has gained over 12% during the last seven days, according to Coinmarketcap data.
Macroeconomic News
UK GDP Unexpectedly Fell
In the second quarter of 2019, the UK’s economy declined for the first time in more than seven years, putting pressure on the newly elected Prime Minister Boris Johnson. Britain’s GDP fell 0.2% compared to the first quarter, while analysts expected a flat reading. In annual terms, the economic growth rate fell to 1.2% from 1.8% in the first quarter, the lowest rate since the start of 2018. The economic performance put pressure on the British pound and the stock market.
German Exports Tumble 8%
In June, German exports saw the biggest year-on-year decline in three years, mainly because of the poor performance of the manufacturing sector. Exports tumbled 8% compared to June 2018, the steepest drop since July 2016. Imports fell 4.4% year-on-year. The largest economy in Europe is heavily affected by the Sino-US trade tensions, as it is an export-reliant country. Germany’s GDP growth rate might slow to 0.5% in 2019, which is the worst outlook for European countries after Italy.
China’s CPI Beat Expectations
China’s inflation index rose last month a bit higher than analysts’ expectations. On Friday, the National Bureau of Statistics (NBS) said that the consumer price index (CPI) in July rose 2.8% compared to the same period in 2018, higher than the expected 2.7% increase. The NBS explained that increasing costs of pork and fresh fruit boosted inflation. Pork prices jumped 27% year-on-year, while fresh fruits surged 39.1%. Separately, the producer price index (PPI) declined by 0.3% in annual terms, while economists expected a flat reading.
Japan’s GDP Expanded on Private Consumption
Japan’s economy expanded at a faster rate than expected in the three months through June. The GDP growth was driven by household consumption and business investment, which offset the poor performance of exports affected by the trade war. Thus, the economy expanded at an annualised 1.8% in the second quarter. Analysts anticipated a 0.4% growth. Household consumption, which accounts for about 60% of the GDP, rose 0.6% compared to the previous quarter.
US Jobless Claims Fell 8,000
The number of US citizens applying for unemployment benefits surprisingly declined last week, pointing to a healthy labour market even when the economy encounters difficulties. On Thursday, the Labor Department said that the number of jobless claims fell 8,000 to a seasonally adjusted 209,000, while economists expected a flat reading at 215,000. The four-week moving average, a more accurate measure, rose 250 to 212,250 last week.
China’s Exports Surprisingly Increased
China’s exports unexpectedly rose in July. On Thursday, custom data showed that that USD-denominated exports increased by 3.3% compared to July 2018, while analysts expected a decline by 2.0%. Imports last month fell 5.6% against the expected drop by 8.3%. Thus, China’s trade surplus in July was $45.06 billion. Most of the economists believe that the trade war with the US would affect China’s GDP growth. Last week, Trump imposed tariffs on additional Chinese goods. In response, the People’s Bank of China (PBOC) devalued its currency by over 1.5%.
Upcoming News to Watch
On Monday, the markets in Singapore, Japan, and India will be closed for national holidays Hari Raya Haji, Mountain Day, and Eid al-Adha, respectively. On Thursday, the markets will be closed in South Korea, Italy, and India for Liberation Day, Assumption Day, and Independence Day, respectively.
On Tuesday, Germany, Spain and the US will report on their inflation performance. France and the UK will release inflation on the next day.
On Wednesday, Germany and the eurozone will publish data on the economic growth in quarterly and annual terms.
The week will end with the US report on its building permits and housing starts.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets.
