Julex Market Weekly 09-08-2013 | Global Stocks Rallied amid Upbeat Economic Reports

Top Stories Last Week

• Global Stocks Rallied amid Upbeat Economic Reports

World stock markets started September with a bang after upbeat economic reports in Europe and China buoyed investor confidence and US job report may keep the Fed from tapering in September. In the week, S&P index rose 1.5%, while MSCI EAFE index rallied 3.3%. The MSCI Emerging Market Index advanced 4.9%. However, gold was flat while the SPGC commodity index rose 1.0%. The bond markets dropped as the Ten-year Treasury rate reached 2.95%. Barclays US Treasury index was down 1.1%, and US high yield bonds dropped 0.3%.

• US Added 169K Jobs and Unemployment Rate Fell to 7.3%

U.S. job growth was less than expected in August and the unemployment rate dropped to a four-and-half-year low as workers gave up the search for work, which could delay the Federal Reserve scaling back its massive monetary stimulus later this month. Nonfarm payrolls increased 169K, adding to signs that third-quarter economic growth may have slowed down a bit. The unemployment rate fell to 7.3%, the lowest since December 2008
However, it fell for the wrong reason. The labor force participation rate, which gauges the proportion of population in the labor force, fell to 63.2% from 63.4% in July, the lowest since August 1978.

• US Manufacturing Activities Improved in August

US manufacturing expanded in August at the fastest pace since June 2011, according to the Institute of Supply Management (ISM). The ISM poll of purchasing managers rose to 55.7% from 55.4% in July – readings above 50% indicate growth in the manufacturing sector. Of the 18 manufacturing industries measured by the ISM, 15 reported growth – including textile mills, food and beverage, computer and electronic products and transportation equipment. Only one industry, miscellaneous manufacturing, reported contraction in August.

• Chinese Manufacturing Sector Continued to Expand

Chinese official PMI figured was improved slightly to 51. The uptick in Chinese manufacturing activity in August has eased slowdown fears, but analysts have flagged concerns about the quality of growth and say growth momentum could slow in the fourth quarter. Data on Monday showed China’s final HSBC purchasing managers’ index (PMI) for August was unchanged from the flash figure of 50.1 and up from an eleven-month low of 47.7 in July. Despite the official PMI being at a 16-month high, it is still only merely 51. It is a still question if the recovery or acceleration in growth is sustainable.

• ECB Kept Monetary Policy Intact

European Central Bank indicated recent improvements in the euro zone’s economy haven’t been strong enough for a pullback from the bank’s easy monetary policies. While the ECB’s Governing Council left its benchmark lending rate unchanged at 0.5% at its meeting, ECB President Mario Draghi said policy makers had discussed lowering the rate. He also said inflation expectations are contained, which will give the central bank room to hold off on raising rates for some time. While the ECB raised its forecast for euro-zone growth this year, the bank also lowered its forecast for economic growth in 2014, a clear sign that policy makers see a slow recovery ahead.

Top Stories to Watch This Week

• US Retail Sales

US retail sales are likely to rise 0.4% in August.

• Euro Zone Industrial Production

Euro zone industrial production is expected to rise 0.4% in July.

• Chinese Economic Data

China will report international trade, industrial production, retail sales and CPI data this week. Market observers will get a better sense about how Chinese economy is performing.