World markets were higher this week despite increased volatility and light trading volumes as is typical for late summer. Geopolitical uncertainties took center stage as two explosions near the Kabul airport in Afghanistan killed at least 90 Afghans, 13 US soldiers and wounded several people amid the U.S. military’s withdrawal from the country. Political developments in China also made headlines as the world’s second largest economy is ramping up regulatory crackdowns.
But the most anticipated event of the week was the Federal Reserve’s annual Jackson Hole symposium on Friday (held virtually for the second consecutive year), where Fed Chairman Jerome Powell said the central bank is likely to begin tapering some of its easy-money policies sometime in Q4. The markets appeared to continue to come to terms with this as never-ending-stimulus may actually be doing more harm than good and inflation is metastasizing throughout the U.S. economy.
Based on statements from other central bank officials, a tapering announcement could come as soon as the Fed’s Sept. 21-22 meeting. Meanwhile, the transition from August to September will be busy, with several major economic reports scheduled to be released.
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AMERICAS
CANADA
Canada’s equity market as measured by the S&P/TSX Composite index returned 1.50% for the week.
Strong gains in energy and materials sections after crude oil and bullion prices rose sharply, contributed to the market’s uptick. Information technology stocks were other prominent gainers on Friday. Data from Statitics Canada showed the Raw Materials Price Index in the country increased 2.2% from the previous month in July, a 10th consecutive monthly increase, due to higher prices for both conventional crude oil (+4.5%) and synthetic crude oil (+4.9%) amid higher global demand and optimistic market sentiment. On a yearly basis, the Raw Materials Price Index increased 37.7%.
U.S.
The major U.S. stock indices gained, recovering most or all of ground lost in previous week.
The tech-heavy NASDAQ outperformed the S&P 500 and the Dow Jones by wide margins.
All three indices are on track to end August higher. The Nasdaq Composite is up 3.1% in August, the S&P 500 is up 2.6% while the Dow Jones is up 1.4%.
Following Powell’s speech at the virtual Jackson Hole conference where he prepared the markets for Fed’s bond taper this year, stocks rallied. The Fed Chair said the economy has reached a point where it no longer needs as much policy support. and also explained why he continues to think the rise in inflation is transitory. “Inflation at these levels is, of course, a cause for concern. But that concern is tempered by a number of factors that suggest that these elevated readings are likely to prove temporary,” he said.
The week’s economic data releases were generally positive with July existing home sales rising 2% and weekly initial jobless claims ticking up but remaining near their lowest levels of the pandemic.
LATAM
In Brazil, the Bovespa returned 2% despite this week’s volatility. The volume of business on Sao Paulo’s stock exchange stood at R$23/762 million (about US$ 4.575 million) on Friday (Aug. 27), as a result of 3,232,849 financial operations. The market was boosted by the oil sector and the increases in the price of international crude oil.
On Thursday (Aug. 26) Brazil’s former finance minister Henrique Meirelles hailed a decision by the Federal Supreme Court to uphold a law that grants autonomy to the central bank. Meirelles who was also head of the central bank said the decision puts the country “on par with the most relevant economies in the world” and helps attract investments. On the macro front, Brazil registered 316,580 job openings in July, according to the General Register of Employed and Unemployed Persons. The figure was better than expected.
In Argentina, stocks as measured by the Merval index jumped 7.93%. Argentina’s central bank head Miguel Ángel Pesce said Thursday (Aug. 27) that the bank mulls scaling back capital controls as companies face $2.1 billion in bond payments. However, analysts warned an election-driven run on the peso could scupper those plans if the ruling party does well in the upcoming midterm elections.
ASIA/PACIFIC
JAPAN
Japanese stocks have lagged their global peers this year but rose over the week. There was a rebound from the “Toyota Shock,”. The car maker had dragged Nikkei to 7-month low after news that it would slash its output by 40% next month due to a chip shortage. Business activity in Japan’s large services sector shrank at the fastest pace in August since May 2020 as state of emergency restrictions remained in place. The au Jibun Bank Japan Services PMI fell sharply to 43.5 in August from a final 47.4 in the prior month, an advance estimate showed. New orders declined for the 19th month running and at a steeper rate, while export sales shrank the most since January. Meanwhile, the au Jibun Bank’s flash manufacturing purchasing managers’ index (PMI) fell to 52.4 in August from 53.0 in July as severe supply chain disruptions hampered production, the Japanese financial institution said.
CHINA
Chinese equities continued to recover despite the high volatility. In regulatory news, Chinese companies wanting to go public — including overseas — must comply with two aspects of regulation, the vice minister for Cyberspace Administration of China said Tuesday (Aug.24): one is the national laws and regulations, and the other is ensuring the security of the national network, “critical information infrastructure” and personal data.
Beijing reportedly weighs ban on U.S. IPOs from domestic tech companies with sensitive data, The Wall Street Journal reported Friday (Aug. 27), citing people familiar with the matter. Chinese tech firms have raised billions of dollars in overseas listings, particularly in the United States. On the banking front, the People’s Bank of China (PBOC) met with leading financial institutions to urge them to strengthen credit support to the economy.
In Hong Kong, the HKEX announced it would launch its first A-share derivatives product to provide international investors with a new risk management tool for their portfolios of Stock Connect eligible A-shares in October.
AUSTRALIA
The Australian market managed a 0.37% weekly gain even as investors were mostly parked on the sidelines on Friday awaiting direction from the Jackson Hole symposium. On the macro front, Australia’s retail sales plunged last month as some regions went into lockdown. Figures from the Australian Bureau of Statistics showed retail sales fell 2.7% in July, compared with market forecasts of a 2.3% fall. This was the largest decrease in retail trade so far this year. By industry, the largest falls were in cafes, restaurants, and takeaway food services (-12.3%), clothing, footwear (-15.4%), and department stores (-11.4%). In other news, Australia’s chief financial watchdog is looking to amend payment for order flow (PFOF) curbs aiming to include arrangements between non-market participant intermediaries.
EUROPE
EUROZONE
European stocks gained ground with the STOXX Europe 600 Index rising 0.76% for the week. Philip Lane, the European Central Bank’s (ECB) chief economist told Reuters on Tuesday (Aug. 25) the ECB will act if Fed’s taper creates spillovers. “The ECB is not a passive bystander,” Lane said. “If there are spillovers to euro-area financing conditions, we are willing and able to move as appropriate, as we have already demonstrated.”
Lane also described recent inflationary pressures as temporary, citing muted wage growth. In economic news, French consumer sentiment unexpectedly declined this month, while Italian consumer and manufacturing sentiment for August also deteriorated.
The IHS Markit Eurozone Composite PMI was down to 59.5 in August, from July’s 15-year high of 60.2 and slightly below market expectations of 59.7, a preliminary estimate showed. In politics, Germany, Europe’s largest economy, has less than a month to go before elections.
CEE/SEE
In Hungary, the BUX fell 1.21% this week. The central bank (NBH) lifted its benchmark base rate by another 30 basis points to 1.5% on Tuesday (Aug. 24) a level not seen since June of 2015, as expected. The bank also also announced that it would start gradually cutting back its
government bond sales. “With inflation still some 70 basis points above the NBH’s forecast and growth going strong, we maintain our call for a 30 basis points hike in September,” Morgan Stanley said in a note.
In Poland, the WIG20 jumped 3.02%. Minutes from the Polish central bank’s July meeting released on Thursday (Aug. 26) showed officials rejected a motion to raise the main interest rate by 15 basis points to 0.25%. In Romania, the BET returned 2.52%. Bucharest and London-listed OMV Petrom, the largest energy company in South-Eastern Europe, and TeraPlast, the leader of the PVC pipe market and one of the most important players on the Romanian installations market will be included in FTSE indices dedicated to Emerging Markets on Sept. 20, 2021, strengthening Romania’s weight in the global provider indices
REST OF EUROPE
In the UK, the FTSE100 closed up 0.85% for the week. On Friday (Aug. 17) gains were led by a rally among industrials stocks following commodity prices higher on a quiet day for corporate news ahead of the August Bank Holiday. The flash reading for IHS Markit’s UK composite PMI tumbled to 55.3 in August, while the PMI for the services sector contracted to 55.5 and the reading for the manufacturing sector slipped to 60.1. In Switzerland, the stock market closed on a positive note on Friday, in line with most of the markets in Europe, and returned 0.19% for the week.
MIDDLE EAST
(Note: Trading days from Sunday 22/08/2021 to Thursday 26/08/2021)
In Israel, trading in the Tel Aviv Stock Exchange (TASE) in the fourth week of August was marked by prices increases in all the leading share indices, similar to the trend in leading stock exchanges worldwide. The benchmark TA35 index increased 2.1%, bringing year-to-date cumulative gains to 17.5%. The Bank of Israel The Bank of Israel held its benchmark interest rate at the historic low of 0.1% for an 11th straight policy meeting on Monday (Aug 23), in line with expectations.
In Egypt, the EGX30 returned 2.93%. The transcontinental country became the Arab World’s biggest liquefied natural gas (LNG) exporter in the second quarter of 2021, according to a report by OAPEC. Egypt is also expected to become one of top global exporters of LNG by the end of 2021.
In Saudi Arabia, the TASI registered a second weekly loss, dropping 0.65%. Stocks in the kingdom were pressured by declining oil prices on Thursday, as Mexico restored some oil production. Other major stock markets in the Gulf region also ended lower on Thursday.
AFRICA
In South Africa (SA), the JSE TOP40 gained 2.66% for the week. SA’s Financial Sector Conduct Authority (FSCA) has suspended the exchange license of ZAR X, a young stock exchange that is partly owned by the Public Investment Corporation (PIC), a move that has temporarily barred share trading by investors and company listings at the alternative trading platform that was launched in 2017.
The regulator insists that it is not worried about the financial health of alternative stock exchanges that are competing with the JSE.
In Nigeria, the NGX All-Share Index and Market Capitalization appreciated by 0.01% to close the week at 39,485.65 and N20.573 trillion respectively. The Nigerian Exchange Group (NGX Group) on Wednesday (Aug. 25) celebrated 60 years of enabling Africa’s largest economy as a leading integrated market infrastructure group in Africa. The Group officially commenced operations on 25 August 1961, as the Lagos Stock Exchange, after it was founded on 15 September 1960.
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