US economic sentiment improves

The US University of Michigan sentiment index surprised to the upside in the preliminary August reading released on Friday. The measure rose for the first time in five months to 67.8, up from 66.4 in July and beating the predicted 66.9. While sentiment towards current conditions deteriorated to 60.9, from 62.7 previously, the expectations index rose from 68.8 to 72.1, with the decision by President Joe Biden not to seek reelection seemingly boosting confidence amongst Democrats. One-year inflation expectations were unchanged at 2.9%.

UK retail sales saw strong gains in July, up 0.5% m/m, although this was from a 0.9% contraction in June and was slightly lower than the predicted 0.6% gain. Stripping out auto fuel, growth was 0.7%, beating the predicted 0.6% and bouncing back from the 1.3% contraction the previous month. Following on from the Q2 GDP growth figures yesterday, the data suggests that the UK economy continues to strengthen, bolstering the case for further monetary easing from the Bank of England in the coming months. The ONS credited the strong sales data on spending related to the Euro 2024 football, and warmer weather.

Today’s Economic Data and Events

There are no major data releases scheduled today

Fixed Income

• US treasury yields were fairly volatile on the short end last week, with some significant data-driven moves in both directions. Ultimately, at the close on Friday there was little change from the previous week for the 2yr yield which closed at 4.0497%. The 10yr closed at 3.8826%, down 6bps from the previous Friday’s close.
• All eyes will now be on the Jackson Hole symposium and any indication as to the path of monetary policy that might be given in speeches there, and the minutes from last month's FOMC meeting due on Wednesday.
• Turkey’s central bank is scheduled to announce its latest rates decision on Tuesday, with the one-week repo expected to be held steady at 50.00% once again.

FX

• After losing ground on Friday, the US dollar ended the week down against its basket of peer currencies, dropping 0.7% w/w.
• Both EUR and GBP saw strong gains, adding 1.0% to 1.1027 (the highest level since January) and 1.4% to 1.2944.
• JPY lost ground against the greenback over the week, closing at 147.63 on Friday, from 146.61 the previous week, although this still remains significantly stronger than the 160 levels breached several weeks ago.

Equities

• A strong end to the week after positive US data dampened recession fears saw most major global equity indices close with robust gains by the end of Friday. In Asia, the Nikkei was the notable gainer as it closed up 9.3% w/w, while the Hang Seng added 1.9%.
• In Europe, the composite Stoxx 600 closed up 2.5% w/w, with the CAC adding 2.5% and the DAX up 3.4% from the previous Friday. The UK’s FTSE 100 closed up 1.8%.
• US markets also logged strong gains, with the Dow Jones, the S&P 500, and the NASDAQ climbing 2.9%, 3.9%, and 5.3% w/w respectively.
• Locally, the DFM closed up 1.1% w/w while the ADX fell 0.2%.

Commodities

• Global oil prices ended the week little changed from the previous Friday’s close, though that belies the somewhat volatile intraday moves seen through the week as traders balanced the risk premium from Middle East tensions and positive US data against signs of a slowdown in China.
• Brent futures ended almost flat on Friday at USD 79.7/b, up less than 0.1% on the previous week, while WTI closed down 0.3% at USD 76.7/b.
• Gold broke through the USD 2,500/oz level for the first time on Friday. The precious metal has slipped back below that level in trading this morning but prices are still up around 21% ytd.