The ECB meeting was on the agenda of the markets last week. Although the risk aversion trend prevailed earlier in the week, positive steps from China and the US as well as ECB’s pigeon steps led to the purchase of risky assets towards the end of the week.
The Chinese indices and LME copper, which started with losses after the week’s data showing that Chinese producer prices recorded the sharpest decline in three years, made positive closing on a weekly basis with increasing risk appetite. In China, the producer price index declined by 0.8% in August, the sharpest decline since August 2016, as demand declined at home and abroad, pushing businesses to lower prices.
In Britain, the parliament’s blockage of an unintelligible exit from the EU supported the rise in Sterling. The pound recovered following the 1.1957 level it tested in the first week of September and closed the week with 1.78% premium at 1.25.
Investors closed their positions in the bond markets before the monetary policy meetings of the major central banks, including the ECB and the FED. Bond yields of major economies increased.
After the SouthChina Morning Post reports that China is ready to buy more agricultural products from the US, stock markets have started to recover. Global Times, one of the Chinese Communist Party’s media organs, announced that Beijing will announce some new measures to ease the negative effects of the trade war with the United States. China announced on Wednesday that it will exempt 16 products imported from the US from additional customs duties. US President Donald Trump said that the United States has agreed to postpone the increase of 25% customs duty on products worth $ 250 billion from China to 30% as a “goodwill indicator” from 1 October to 15 October.
The steps taken by the US and China to ease the trade tension supported the risk appetite across the market. US and Chinese indices followed strong losses following the week’s losses. LME copper has tested the highest level since July at $ 5980, driven by positive steps in Sino-US relations. He closed the week at $ 5966 with a 2.37% premium.
The ECB cut its deposit rate from -0.40% to -0.50% at its meeting ended Thursday, leaving the benchmark interest rate at 0%. In addition, the monetary expansion will begin again in November starting from 20 billion euros per month and announced that it will continue as long as necessary. Asset purchases will be completed just before the interest rate increase, while the amount of the necessary increase will be specified. The ECB lowered its growth forecast from 1.2% to 1.1% for 2019 and from 1.4% to 1.2% for 2020. Following the decision, the EURUSD parity rose to 1.1109 on Friday.
Global markets awaiting the FED interest rate decision to be announced on September 18th started the week with sales due to weak Chinese data set and increasing geopolitical concerns. Following the data set for urban investments, industrial production and retail sales in China, China Bureau of Statistics said that the country is facing downward pressures due to external uncertainties and pointed out the uncertainties regarding the world’s second largest economy.
Oil prices boosted concerns about the supply of a Saturday attack on Saudi Arabia’s oil facilities. Oil prices, which recorded the biggest increase of 20 to 30 years after the attack that caused 5% of world oil production to halt; Trump declined from its peak levels and closed at 15% after the US allowed the use of emergency reserves to ensure supply stability in the oil market. US officials blamed Iran for the attack.
With this incident, the pricing of geopolitical risks brought sales to the market. Despite the rise in energy sector shares, US indices closed the day minus. The weaker than expected Chinese data also signaled the global slowdown and supported negative pricing.
LME copper closed the day at $ 5857, a loss of 1.81%, as weak data from China boosted concerns over demand. After Beijing’s benchmark interest rates remained unchanged, Chinese indices were dominated by sales this morning. LME copper has fallen to $ 5790, falling around $ 5800, with concerns about losses of 1.5% in the Chinese markets, as well as concerns that the US and China trade negotiation committees will meet in Washington from Thursday.
The EUR / USD started the new week in the 1.1075 zone, rising above the 1.11 level after the European Central Bank meeting last week. The dollar gained value as investors turned to secure assets, while the euro / usd parity traded at 1.1025 yesterday with a 0.2% premium after closing the day at 1.10.