​ ​US

Anticipating a smaller rate hike in the September meeting, market sentiment have turned more optimistic. US equity markets continued the rally, with the 3 major equity indices 1.45-1.99% over the past 5 days ending Thursday. The Fed meeting minutes were released during the week, participants were quoted saying ‘it likely would become appropriate at some point to slow the pace of policy rate increases’, further raising expectations for ease in rate hikes. St. Louis Fed President James Bullard calls for a 75 bps for next meeting, while Kansas City Fed President Esther George pushed back the idea, saying that the Fed have to watch carefully before acting as data tends to lag. According to Bloomberg interest rate futures data, markets are split regarding the September interest rate meeting, with an implied 2.5 rate hikes priced in at the moment.

On the economic front, retail sales in July was flat, slightly missing market expectations of a 0.1% gain MoM. On the other hand, industrial production in July were positive, the MoM growth of 0.6% was higher than both market expectations and the previous month figure. Employment data continue to suggest a tight labour market, with initial and continuing jobless claims coming in lower than market expectations. However, a recent survey on hiring done by PwC showed around half of the surveyed companies are freezing hiring, with plans to reduce headcount. Markets will continue to pay attention to relevant data for the next rate hike decision. Next week, preliminary Markit PMIs for both manufacturing and services in August, initial jobless claims, as well as University of Michigan sentiment for August will be released.

 ​Europe

European equities had a relatively flat week, the UK FTSE gained 1.02% over the past 5 days ending Thursday, while the French CAC and German DAX only edged 0.02-0.19% higher. Droughts continued due to the heat and dry weather, water levels are down affecting shipping traffic, hydroelectric power output has also fallen around 20% YoY, raising the demand for natural gas. European gas prices have further rose over the week, hitting a record high of 241 Euros per megawatt-hour on Thursday. Costlier fuel forces some industrial activity to a halt, raising further concerns over the European economy. As for fundamentals, UK inflation continued to worsen, July CPI hit double digits, and the 10.1% YoY figure was the highest in 40 years reflecting the higher energy prices. German ZEW economic sentiment for August came in at -55.3, worse than both market expectations and the previous month figure. Next week, August Eurozone manufacturing and services PMIs, as well as Eurozone consumer confidence will be released.

​China

With weaker sentiment, and disappointing data, Hong Kong and Chinese equity markets continued the weaker form. Over the week, the CSI 300 lost 0.96%, while the Hang Seng Index was down 2.00%. Earlier, 5 Chinese state owned enterprises including Sinopec announced plans to delist from the US exchange, further raising concerns over the clash between China and the US over audit matters. The Chinese property sector remains under pressure, Fitch downgraded Country Garden to non-investment grade status, and the management warns of a sharp fall in earnings. To further support the economy, China’s Premier Li Keqiang asked local governments to roll out more supportive policies. Expect a cut in the Loan Prime Rates (LPR) announcing next week to further support both the property sector and the economy as a whole. As for economic data, fixed asset investment, industrial production, and retail sales figures released this week all came in weaker than market expectations. Next week, China will publish the latest 1-year and 5-year Loan Prime Rates (LPR), as well as the industrial profits figure.