In focus
Bonds reclaimed the center of attention last week as yields around the world rose again. There were many factors pulling traders in different directions, but the larger-than-normal Treasury auctions did not help trading either. Internationally, Chinese data came in weaker than expected while U.K. GDP came in better than expected. All of this, on top of the slow removal of yield curve control by the Bank of Japan, caused yields around the world to spike.
Another factor last week for market price action was new inflation data. Consumer Price (CPI) and Producer Price Index (PPI) numbers had something for both the bulls and the bears. While CPI was in line with expectations, there was a reacceleration in PPI data. The market is still trying to figure out if the Federal Reserve (Fed) is done hiking or not and will likely have to wait until Jackson Hole next week to get any more guidance.
After a strong first half of the year and run up through the summer, the last two weeks saw a cooling off for equity markets. Better-than-expected earnings for some companies couldn’t even push the market higher. It was tough trading internationally too as emerging markets (EM) continued to fare worse than both the U.S. and international developed markets. China’s slow recovery and huge size in EM indices has not helped, despite the fact that some EM central banks are on the verge of cutting interest rates.
A look back
- Global stocks declined for the second- consecutive week, with the S&P 500 faring best, down -0.3%, while EM fell almost -2%.
- Yields rose across the curve again as increased Treasury auctions outweighed other economic factors and pushed yields higher by about 0.12%.
- On a month-over-month basis, CPI was in line with expectations while PPI reaccelerated from the prior month and exceeded consensus estimates.
A look ahead
- Retail company earnings will be the focus as several large retailers will show how the spring fared for consumer spending.
- Only one Fed speaker is on tap this week ahead of the Jackson Hole Symposium next week, which will allow many Fed speakers to relay their views of the latest inflation data.
- Economic releases: Retail Sales, Empire Manufacturing, Building Permits, Housing Starts, Industrial Production, FOMC Meeting minutes, Leading Economic Index.
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