Global Market Report - September 3

The FTSE 100 was one of the bright spots among world markets today, helped by a fall in the pound

Morningstar 06/09/2561

Global Market Report

Asia

Markets across the region weakened further at the start of the new trading week. For once, the Shanghai Composite Index was not the biggest faller in percentage terms as today this honour went to Japan’s Nikkei 225. At the weekend, the Bank of Japan Governor, Haruhiko Kuroda, said that an interest rise was still a long way off.

China and Hong Kong indices were still weaker on the day, however.

China’s Caixin Purchasing Managers’ Index (PMI) came in softer than expected, but the reading above 50 shows the sector is still expanding.

Europe

UK manufacturing figures were worse than predicted. The August PMI was 52.8, against expectations of 53.9, and this was the lowest for more than two years. Construction PMI data is due tomorrow and services on Wednesday.

While the PMI readings are one of many factors considered by the Bank of England, it is not expected to change interest rates this month.  The future of the Bank’s Governor, who is due to leave his post in June 2019, is currently being thrashed out in the corridors of power. Media discussion centres on whether Carney will see out the Brexit process, rather than leave two months after the UK’s formal withdrawal from the EU.

The FTSE 100 defied the gloom settling on Eurozone and Asian markets by posting a gain, but this was largely currency-fuelled – with the pound once again stalling on yet more Cabinet divisions over Brexit. A recent hardline stance from Chief Negotiator Michel Barnier has not helped sterling. The blue-chip index was up nearly 1% on Friday to just below 7,500 points, a technical level it breached last week.

North America

US and Canadian stock markets are closed for Labor Day. However, the shortened trading week culminates in one of the biggest announcements of the month: the August non-farm payroll numbers. The US economy is expected to have added 193,000 jobs in August, higher than the 157,000 seen in July. But July’s forecast was for a number below 200,000 and the figure came in sharply below this. The unemployment rate is expected to drop slightly to 3.8%.

On Wednesday’s Canada’s central bank is expected to hold interest rates at 1.5%, although there is always the potential for the bank to surprise currency investors with a hike.

Looming over the week’s proceedings is the tension between the US and Canada over NAFTA negotiations.

 

 

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