The garden looks rosy across the pond, the Michigan Consumer Confidence for September rebounded, Augusts Industrial Production data showed a modest gain, combined with lower than expected inflation data. This combination will be underlining the probability the Federal Reserve will raise interest rates again later this month. In the week that Lehman collapse 10 years anniversary is being remembered the S&P 500 rose 1% over the past five days to its second-highest close. The S&P 500 rose every day of the past five days as America continues to lead the global equity markets. In contrast, US Treasuries fell, the yield on the ten years once again rising above 3%. It will be interesting to see if US ten-year yields can rise further without a compensating move in German Bunds.
The strength in American markets did help drag Europe modestly higher over the past five days, however, unlike US equity markets, they remain lower on the month overall. The FTSE 100 rose despite the pound gaining against the US dollar. The dollar lost ground over the week against its basket of other currencies. On the back of the weaker dollar and the possible impact of the hurricane hitting the east coast of America the oil price rose on the week.
We highlighted recently that equity markets had been rising as had the Vix index, which can be a signal that there is little confidence in the market rally at that point. The Vix fell sharply this week suggesting confidence had returned in the underlying mood. The transport index continued to climb in the past few days.
September has been known to be a difficult month and this month’s mettle has been tested, particularly by Trump and the increased tensions with China. However, equity markets in America apparently remain supported whilst economic data underpins the market.
The week ahead we have August inflation data for the eurozone. With the ECB reiterating its monetary policy outlook for the coming year last week, unless they're a marked divergence from expectations there is likely to be little impact on interest rate sentiment. Recent economic data suggests the UK economy appears to be starting the third quarter in a reasonably robust manner. This week we get retail sales for August. A modest month on month rise is expected. At the end of the week flash Purchasing Manager Survey results for September for both the eurozone and the US economies will provide further evidence to the outlook for both economies.