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Decided to make adjustments on the way I blog & share due to time constraints and other commitments. In the coming weeks you should see them. Short updates but more frequent & concise.

Tuesday, September 8, 2015

Weekly Market Highlights September (1)

Source: Amp Capital (here for full market update) & iCapital biz (subscription required)

While most share markets managed to remain above recent lows they had a volatile week, falling back again thanks largely to ongoing worries about Chinese economic growth and the Fed, with indications from the ECB that it is prepared to ease further if needed - “the Draghi put” - providing only partial support. US shares lost 3.4%, Eurozone fell 2.9%, Japanese lost 7% and Chinese lost 2.2%.

The next few months are likely to remain rough for shares as September and October are often tough months and the worries about China and the Fed are likely to linger for a while. As a result, it’s still too early to be confident we have seen the low.

United States
US economic data was mixed with a fall in the much watched ISM manufacturing conditions index for August and slightly softer than expected employment but stronger than expected construction spending and vehicle sales, continued strong readings for the ISM services conditions index, a narrowing in the trade deficit for July and a further fall in unemployment.

Cutting through the volatility the US economy looks to be continuing to grow somewhere around 2-2.5%, which is good but a long way from booming. The much anticipated August US jobs report keeps the prospect of a September Fed rate hike on the table. 

US bond market’s implied probability of a September hike of around 30-35% sounds about right (last week it was ~40%). It would also seem unlikely for the Fed to want to hike at this point with the markets seemingly unprepared for it, given the uncertainties around the outlook.

As expected the ECB left monetary policy unchanged at its meeting, but in response to downwards revisions to growth and inflation forecasts and global uncertainties has adopted a strong easing bias with a “willingness, readiness and capacity to act”, suggesting that if the downside risks don’t recede soon an expanded quantitative easing program could be announced before the end of the year. 

Eurozone inflation was a touch stronger but still well below target providing plenty of motivation for the ECB to do more if global risks increase. The good news though is that despite all the uncertainty lately the Eurozone composite business conditions PMI for August was actually revised up to its highest level for this recovery.

China’s business conditions PMI’s added to concerns about Chinese economic growth with the official manufacturing PMI down slightly in August and services PMIs also down. Meanwhile, the risks of a property crash – last year’s big China worry – continue to recede with home prices up in August for the fourth month in a row led by Tier 1 cities. The big focus internationally is likely to be on Chinese economic data for August. Data: exports and imports, headline inflation, non-food inflation, industrial production, retail sales and investment. Money supply and credit data will also be released.

**Repeat with small modifications**
Share markets are likely to see more volatility in the next month or two. We are still in a seasonally weak period of the year for shares (Sept and Oct), uncertainties regarding China and the emerging world are likely to intensify in the short term, posing risks for global growth and the uncertainty around US Fed moves. Barring any major event, I think for now this is just a correction. Hold your horses.

Closer to home, same old story. I've been talking it over many past weeks:
Aug 22: Alarming Figures of Malaysia's Debt Problem
Aug 16: Stuck in the Middle of Nowhere
Aug 8: Weekly Market Highlights August (1) - Special Malaysia Highlights
Aug 5: The Risk of Holding Ringgit is Skyrocketing, WTB Donations
July 26: Sunday Lite: Flip Flop In Malaysia's Property Market

Aug 8 post has a section on What You Can Do with your MYR. I'm inclined to say that our financial woes will continue until we get more clarity on our 2016 Budget coming October. That's still two grueling months ahead and likely not that any good news will come out. I also heard some rumors about GST but I cannot share - later kena charge for false information :)

Semua salah siapa??

Lanun Bugis - Pirates of the Carry-BN

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