Summary for the 5th of August


The Chinese yuan had this morning weakened to 7 CNY per USD for the first time in 10 years (9th May 2008). The depreciation came after the People’s Bank of China (PBOC) set the yuan reference rate at 6.9225 CNY per USD before the market opened, the weakest level since December 2018. It could be interpreted as the Chinese government was using its currency as a mean in the current trade conflict with the US. The PBOC stated that its currency policy was unchanged, and the depreciation came due to expectations of tariffs against China.

The Federal Reserve cut the federal funds rate by 0.25% to 2.25% last week, as expected by the financial markets, and disappointed those who expected a higher cut than 0.25%. The stock market fell after the interest rate decision meeting, and kept falling after Donald Trump announced further escalation of the trade conflict by increasing the tariffs on Chinese goods.

US non farm payrolls for July published last week was as the market had expected, as well as indicating a slower growth in the labor market. Non farm payrolls increased by 164  000 in July, the expectations were 165 000. The growth from the previous two months was downward revised by 41 000. July payrolls were inline with the current monthly average so far in 2019, the monthly average for 2018 was 223 000. The weaker growth in payrolls indicating a stabilized unemployment rate, still, there was no sign of the low unemployment rate was leading toward growth in the hourly earnings.

Indices for 05.08.2019:

Dow: -0.4% (2nd of August)
S&P 500: -0.7% (2nd of August)
Nasdaq: -1.3% (2nd of August)
Nikkei: -2.3%  (5th of August)
Chinese indices: -2.9% (5th of August)
STOXX Europe 600 Index: -2.31% (5th of August)

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