We have left behind a busy week. Risky assets, which saw strong sales earlier in the week, and news that the US and China agreed on high-level trade talks in early October, rose as investors reduced concerns about the global economy.
By Trump’s decision, the United States began to levy an additional 15 percent customs duty on September 1 of a $ 125 billion worth of products, including shoes, smart watches and televisions imported from China. China imposed new customs duties on certain products, including crude US oil. Trump’s statement that the two sides could meet later this month and then said that the phone conversations between the two countries were positive increased risk appetite across the markets.
The Chinese Ministry of Commerce said that the team to conduct trade talks would consult with US counterparts in mid-September to prepare for negotiations in early October, pointing to progress in reducing trade tensions. The ministry said both sides agreed to take actual steps to create appropriate conditions.
US stock markets, which were closed on the first trading day of September, started the week with sales under the effect of August ISM manufacturing index which was announced as 49.1 against 51.1 expectation on Tuesday. In the data details, both domestic demand and external demand experienced sharp declines. The US manufacturing sector contracted for the first time since 2016 due to the weakening global economy and increased trade tensions with China, according to ISM manufacturing index data. After the data, the expectations of the Fed to cut interest rates at the September meeting (17-18 September) increased. The dollar index gave back its gains. However, in the middle of the week, the strong ADP, which was higher than expected in the US, turned the indexes upwards due to private sector employment (195K) and ISM services index (56.4) data and positive news about China-US negotiations. According to ADP data, private sector employment in the US recorded the strongest increase in four months in August. The US ISM services index rose in August, registering the sharpest increase since February. According to data released on Friday, US non-farm payrolls rose to 130K in August, below expectations (158K); hourly wages rose 0.4% above expectations (0.3%).
Asian markets left a premium week behind the positive news flow on trade talks as well as the support of strong data. In China, manufacturing PMI data was announced above 50.4, while service PMI data was announced as 52.1, above 51.7.
LME copper LME copper has tested the lowest level since May 2017 at $ 5518 on Tuesday, as the Chinese-US tension weakened demand and the sharp appreciation of the dollar. Then, after the US ISM manufacturing index, the dollar reversed its gains, with Trump’s announcement that the negotiations with China were going well, and with the low prices creating arbitrage opportunities, copper changed direction.
The pound tested the lowest level since January 2017 with 1.1957, when British Prime Minister Jonhson warned parliamentarians that if they tied his hand on Brexit, he would go to an election earlier this week. However, in that parliamentary vote Tuesday, the pound rose sharply with the adoption of a bill that prevented the country from getting out of the European Union.
The euro fell to its lowest level since May 2017 at the beginning of the week, with weak economic data from the EU highlighting expectations that the ECB will loosen its monetary policy at its next week’s meeting.
The escalation of trade wars has caused the growth in the European economy to lose momentum. At its monetary policy meeting on September 12, the ECB pledged to announce a package to support the economy.
Speaking on Friday, FED chairman Powell stressed that they expect the US economy to continue moderate growth. Addressing the strength of the employment market, the president said that they would continue to monitor risks closely and act as required by developments. Powell’s speech was interpreted to support the 25 basis point reduction compared to the market expectation of a 50 basis point reduction.
Markets started the new week with trading data released in China. China’s August trade surplus expectation was announced as $ 34.84 bn, below $ 44.3 bn. Exports fell by 1% in dollar terms while imports fell by 5.6%. Data showing that China’s exports fell contrary to expectations in August brought data to Chinese indices on Monday morning, with the expectation that more support should be given to the economy.
Fed President Jerome Powell said the Fed would continue to “take appropriate steps için to sustain economic expansion, boosting risk appetite on the first day of the week. Indices, which started the week with rising optimism in the US, saw the US 10-year bond yield rise to 1.60%.