World markets kissed summer goodbye and moved into what has typically been the worst period of the year for risk assets: September. Traders and investors digested a plethora of economic data,
including a much softer-than-expected August U.S. nonfarm payroll report. The week was rich in major events: The last U.S. military plane left Afghanistan this week after the 20-year conflict that killed tens of thousands of Afghans and about 2,400 Americans, while costing in excess of $1 trillion. Hurricane Ida killed dozens of people in four states in the U.S. In Asia, Japan’s Prime Minister Yoshihide Suga resigned and Asia business activity declined into contraction territory. Will fall bring the stock market fall? Some investor caution is natural as from a market standpoint, the next two months are typically the worst of the year.
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AMERICAS
CANADA
The Canadian stock market was up 1.50% this week. S&P Dow Jones Indices said Bombardier Inc. and Birchcliff Energy Ltd. will make their returns to the S&P/TSX Composite Index on Sept. 20.
Canadian investors acquired a record $57.2 billion in foreign securities during the spring months that constitute the second quarter of 2021, according to data released by Statistics Canada. The bulk of the investments ($33.7 billion) went into U.S. equities in the second quarter, targeting large technology companies. In economic news, labor productivity in Canada edged up 0.6% in the second quarter, rebounding from a 1.7% decline in the previous quarter.
U.S.
U.S. stocks finished mixed on the week with trading volumes generally subdued. On Wednesday, payrolls firm ADP said private sector job creations had come in at 374,000, or much lower than the 625,000 expected. On Friday, nonfarm payrolls rose by 235,000 jobs month-over-month in August, well below the Bloomberg consensus estimate of a 733,000 rise, and well short of the 720,000 new hires projected by economists surveyed by Dow Jones. Job growth in the leisure and hospitality sector stalled, highlighting the impact of renewed Covid-related restrictions. August’s underwhelming job growth could have an impact on the Federal Reserve’s policymaking decisions with regards to scaling back monetary support by the end of the year. Meanwhile, companies and suppliers surveyed by the Institute for Supply Management (ISM) reported continued struggles with “record-long raw materials lead times, continued shortages of critical basic materials, rising commodities prices, and difficulties in transporting products.” All U.S. markets will be closed on Monday (Sept. 6) in observance of the Labor Day holiday.
LATAM
In Brazil, the Bovespa underperformed other indices in the region, slumping 3% on concerns over the potential fiscal impact of a tax reform and as energy regulators decided to hike electricity tariff for September. Brazil’s House of Deputies approved (398 – 77 votes) Bill 2,337, which would reduce the corporate income tax rate and establish a 15% withholding tax on dividends as part of a comprehensive reform to the Brazilian tax system.
Brazil will hit record for stock offerings this year reaching more than R$159 (US$31), according to Bank of America Corp. On the macro front, unemployment in Brazil stands at 14.1%, in the second quarter of 2021, while Gross Domestic Product (GDP) registered a 0.1% drop, compared to the previous three months.
Stocks in Chile, returned 0.10%. On Wednesday, Chile’s central bank lifted its monetary policy interest rate by 75 bps to 1.50%, above market estimates of 1.25%. The bank revised upwards its GDP growth projections to 10.5%-11.5% from a previous estimate of 8.5%-9.5% amid the expected “rapid recovery” from a recession.
ASIA/PACIFIC
JAPAN
Stocks in Japan, as measured by the Nikkei 225, returned 5.38%. The strong rally came after Prime Minister Yoshihide Suga, who has been under fire for his handling of the Covid situation in the country,
announced his resignation and also said he will not seek reelection as leader of the ruling Liberal Democratic Party (LDP) when it holds its presidential election on September 29. Investors felt some political uncertainty was removed and are now expecting his successor to increase economic stimulus. Japan’s industrial production retreated in August, falling 1.5% month on month in July, following a 6.5% rise in June.
CHINA
Chinese equities rose for the second week in a row. Stock trading volume across the local stock markets has held above 1 trillion yuan ($154.56 billion) for the last six weeks and hit a high for the year (1.71 trillion yuan) on Wednesday (Sept.1) , according to Shanghai-based Wind Information.
On Thursday, President Xi Jinping announced the formation of a Beijing Stock Exchange, aimed at supporting the development of small and medium-sized enterprises (SMEs). The announcement comes as the country tries to lure domestic companies into listing at home instead of overseas and as the regulatory crackdown on a number of industries has intensified, unnerving foreign investors. Their share of domestic Chinese equities dropped in August to the lowest level since 2014, according to fund flow data from EPFR.
On the banking front, China’s central bank said that it would provide RMB 300 billion in low-cost funding to lenders for providing financing to SMEs. China continues its strong commitment to its capital markets. In economic news, the official nonmanufacturing PMI dropped to 47.5 from 53.3 in July, showing contraction in the sector for the first time since February 2020. The Caixin services PMI, a private survey that focuses on smaller businesses, came in at 46.7 (against July’s reading of 54.9) its first contraction in 16 months.
AUSTRALIA
The ASX200 finished the week with a gain, advancing 0.46%, its best performance in three weeks.
The end of August marked the 16th monthly rise in the past 17 months even as lockdowns continue to threaten economic growth and contraction in services sector activity accelerated.
The country is awaiting direction from its own central bank next week, with the Reserve Bank of Australia tipped to delay scaling back its extraordinary monetary stimulus program, according to ANZ. Some 15 analysts polled by Reuters said the bank would not delay the taper and only 10 that it would.
EUROPE
EUROZONE
Major European indices were mixed as Eurozone’s annual inflation rate accelerated to 3% in August, from 2.2% in the previous month, well above market expectations of 2.7% and the European Central Bank’s (ECB) 2% target. That would match the highest rate of inflation since November 2011,
according to the EU’s statistics agency Eurostat. Upward pressure came from energy, food, and industrial goods.
The inflation surge could trigger some vigorous debate at next week’s ECB policy meeting, possibly forcing officials into some kind of policy tightening.
ECB policymakers Klaas Knot and Robert Holzmann said in separate interviews this week that the Frankfurt-based institution should dial back its crisis-era policies and slow down the purchase pace of the Pandemic Emergency Purchase Programme.
The euro zone’s economic sentiment index, which measures the confidence of corporate and consumer sectors, fell to 117.5 in August from a record high of 119.0 in July with France and the Netherlands posting the sharpest drops in sentiment. The final IHS Markit composite Purchasing Managers’ Index (PMI), seen as a good guide to economic health, dropped to 59.0 last month from July’s 15-year high of 60.2.
CEE/SEE
In Romania, Bucharest Stock Exchange’s (BVB) BET index lost 1.08% this week. In corporate news, OMV Petrom, the largest integrated energy company in South-Eastern Europe, celebrated 20 years since its listing on the BVB.
The company managed to increase its market value more than 15 times in the 20 years of trading: from 1.6 billion lei at the end of 2001, to 25 billion lei at the closing of the stock exchange trading day of September 2, 2021. Based on the market capitalization, OMV Petrom is the largest Romanian company on the Romanian bourse. In currencies, the Romanian leu plunged to a new all-time low against the euro on Thursday (September 2), as the National Bank of Romania’s (BNR) average reference rate stood at 4.9386 lei to the European currency. BNR foreign exchange reserves stood at EUR 41.616 million in August.
In Hungary, Budapest’s BUX index jumped 2.32%. The country’s retail sales rose a calendar-adjusted 3.0% year-on-year in July, after a 5.8 percent increase in June, figures from the Hungarian Central Statistical Office showed.
In Poland, the WIG20 gained 2.46% this week. Domestic individual investors generated 24% of Warsaw Stock Exchange’s (GPW) main market equities turnover in H1 2021 (+2 pps YoY), a record-high H1 share in a decade, GPW said. In August, GPW Main Market electronic order book equities turnover value increased by 1.8% YoY to PLN 17.7 billion.
REST OF EUROPE
In the UK, London’s premier FTSE100 index weakened 0.14% this week. UK service providers signalled that August was the worst month for business activity growth since the current phase of recovery began in March, IHS Markit said. The slowdown partly reflected a normalisation of customer demand, shortages of staff and disrupted supply chains. The Bank of England named Huw Pill as new chief economist. The former Goldman Sachs and European Central Bank veteran will start in the role on September 6, replacing Andy Haldane who leaves after 32 years with the Bank. Could this be the medicine that the UK economy needs?
In Switzerland, the stock market closed weak, with the SMI returning -0.70%. In corporate news, SIX, the operator of the Swiss bourse will acquire a 50% stake in leading European trade repository REGIS-TR during the first half of 2022, from joint venture partner Clearstream. On the macro front, the economy of Switzerland expanded 1.8% on quarter in the three months to June 2021, rebounding from a downwardly revised 0.4% drop in the previous period, thanks to the relaxation of COVID related measures data published by the State Secretariat for Economic Affairs (SECO) revealed. Inflation grew 0.9% year-on-year in August, above market expectations of 0.8%, data from the Federal Statistical Office showed. It was the highest inflation rate since November of 2018.
MIDDLE EAST
(Note: Trading days from Sunday 29/08/2021 to Thursday 02/09/2021)
In Israel, trading in the Tel Aviv Stock Exchange (TASE) was marked by prices increases in most of the leading share indices. The benchmark TA-35 index increased 0.4% over the past week, bringing year-to-date cumulative gains to 17.9%, according to TASE. The Bank of Israel released figures indicating that foreign investors acquired US$ 425 million net in shares in June 2021, following acquisitions of shares of about US$ 1,430 million net in the first five months of this year. In currencies, Israel’s foreign exchange reserves at the end of August 2021 stood at $205,912 million, an increase of $4,217 million from their level at the end of the previous month, the central bank of the State of Israel said.
In Egypt, the EGX30 blue-chip index closed up 0.16% on Thursday (Sep. 2) with capital market company Pioneers Holding soaring over 7%, extending gains from the previous session following a sharp rise in its second-quarter earnings. For the week, EGX30 returned 1.58%.
Saudi Arabia’s benchmark index TASI closed up 1.72% this week following an OPEC+ agreement to stick to gradual output hikes. Saudi energy giant International Company for Power and Water Projects (ACWA Power) on Thursday (Sep.2) announced its intention to proceed with an IPO and list its shares on the main market of the Saudi Stock Exchange, also know as Tadawul.
AFRICA
In South Africa, Johannesburg’s JSE Top40 plunged 2.10%. The rand was trading at R14.29/$ on Friday afternoon – its best level in almost a month – after US jobs shocker. However, a Reuters poll showed that the South African rand and Brazil’s real are seen driving volatility in a likely sell-off in Emerging Marker currencies in the next three months amid tapering fears.
In Nigeria, the All-share index of the Nigerian Exchange returned -0.57% for the week but recorded a 1.74% growth in August to close at 39,219.61 index points from 38,547.08 recorded as of the end of July. The value of shares traded represents a 6.38% increase compared to N47.69 billion recorded in the previous month.
In other news, Fitch Ratings affirmed Angola’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘CCC’, as higher oil prices will drive an increase in government revenue, which will contribute to a fiscal surplus of 1.2% of GDP in 2021, the agency said. In Zimbabwe, the central bank left its policy rate steady for the third time this year, to combat inflation.
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