US

Fed meeting minutes last month showed that most officials agreed that tapering of bond purchases could begin within the year, sparking concerns over an earlier tapering, sending global equities lower, with the three major US stock indices falling between 1.23% and 1.85% over the past five days ending Thursday. Minutes showed that most officials believe that US inflation has made progress, although the labour market still has room for improvement. St. Louis Fed President James Bullard was vocal that he would like to see bond purchase tapering done by the first quarter next year, and rate hikes starting in the fourth quarter. Earlier, US Fed Chairman Jerome Powell warned that a resurgence in the epidemic would bring uncertainty to the economic recovery and stressed the limitations of the Fed's tools.

In fact, cases in the US jumped again, with daily deaths in the country reaching a record high since February this year. Just as the epidemic rebounded, the US economy showed signs of slowing down, with July retail sales down by 1.1% MoM, more than the expected 0.3% drop; the August homebuilder confidence index also fell to a 13-month low. With inflation making progress on one hand, and a revival of the epidemic on the other, the market is watching for more insight from Powell at the Jackson Hole meeting on 26-28 August regarding the pace of tapering. Next week, the US will release economic data such as the Markit Manufacturing and Services PMI.

Europe

As global investor sentiment turned cautious, European stocks followed the external markets, with the UK, French, and German indices falling between 1.32% and 4.21% over the past five days ending Thursday. Recent economic data from the Eurozone was lukewarm, with the Harmonised Index of Consumer Prices (HICP) up 2.2% YoY in July, in line with expectations, the final GDP growth of 2% QoQ in 2021 Q2 also met market expectations. Next week, the Eurozone will release more data including the August Markit Manufacturing PMI.

China

Reports on the Chinese authorities expanding regulations across more sectors increased the selling pressure on Hong Kong and Chinese markets. The Hang Seng Index fell below the 25,000 level again on Friday and hit a new low since early November last year, adding up to a 5.84% drop over the week, while the CSI 300 Index also fell 3.57% over the same period. The Central Government's latest draft regulations targeting ‘unfair competition’ in the cyberspace and revisiting information infrastructure security put pressure on internet-related sectors, quality stocks such as Tencent were also hit by the news. In addition, well performing sectors, such as electric vehicles and healthcare, were also targeted by new regulations, bringing the overall market down. The market will continue to monitor the latest regulatory developments and their implications.