Weekly Market Summary

by Raymond Chatlani

On Friday, industrial production data showed that factory output in July in India expanded 13.8% from a year earlier, nearly double analyst estimates and the fastest pace since April.

On Monday, Asian stockmarkets climbed as robust Chinese economic indicators boosted confidence in the economic recovery. China's industrial production growth accelerated to 13.9 percent year-on-year in August from July's 13.4 percent increase. Investment in factories and other fixed assets soared 24.8 percent while retail sales of consumer goods rose 18.4 percent due to better-than-expected auto sales. EU and US indices rose on China's robust data and relief that new global bank rules would not mean a rush to raise billions of dollars in extra capital. The new banking regulation Basel 3 gives institutions up to 2019 to adequately raise their capital/ liquidity ratios to conform with this new legislation.

On Tuesday, Asian markets were up except for Japan, Singapore and South Korea who are heavily dependant on exports. This can be attributed to their strenghtening currencies against the US Dollar with the Yen hitting a 15 year high against the American Dollar. European and US indices closed mixed as German consumer confidence fell sharply in September and industrial production unexpectedly stagnated during July in the countries that use the euro, while US retail sales grew more than forecast as sales rose in August to their highest gain in 5 months. Gold hit a new record high as the US Dollar fell against most global currencies.

On Wednesday, Japan led Asian stockmarkets higher soaring nearly 3 percent after the government announced its first currency intervention to weaken the yen since 2004. European stocks fell after a gauge of manufacturing in New York State unexpectedly fell to its lowest level in more than a year in September. US stocks rose when the Federal Reserve reported that industrial production in the USA rose modestly in August and the manufacturing sector grew for the 12th time in 14 months.

On Thursday, Asian markets dropped as the US dollar posted its largest gain against the Yen in the last two years as Japan began selling its currency on foreign exchange markets on Wednesday and on speculation that China's banking regulator was considering raising capital adequacy ratios at banks to constrain excesses in the property market. European stocks were lower on unemployment data in the USA. US indices were little changed although the Labor Department said first-time claims for unemployment benefits fell to a two-month low, but still remain at levels that indicate economic growth is sluggish. Claims dropped to 450,000 last week which is below the figure of 460,000 expected by economists.

On Friday, Asian indices all rose amid confidence that the region's growth will be sustained despite slow economic recoveries in the U.S. and Europe. Gold hit a new record high of $1,282 an ounce as the US dollar resumed its fall against most major currencies but pulled back to $1,276 at the time of writing. European markets were up on acquisition news and recediing fears of recession but fell into negative territory at the close after consumer confidence fell in the USA. In the USA consumer sentiment edged down in August and US indices were flat.
This week we have seen economic data improve again. In the USA, the third drop in jobless claims in four weeks and a mild uptick in wholesale prices in August add to evidence that a second recession is unlikely. Economists are less worried that the U.S. will experience another round of mass layoffs and its first bout of deflation since the 1930s. The US economy is still growing, but at a pace too slow to create many jobs.

Last week we started to invest a little bit into emerging markets for a few select clients and this week we have restructured most of our clients' portfolios from an allocation of 75% bonds / 25% cash into 75% bonds / 25% emerging market equities. If economic data continues to improve in the next few weeks, we shall continue to increase exposure to more risky assets.