Markets last week 12/09/2023

United States

Stocks concluded the shortened holiday week on a downbeat note, with rising interest rates driven by positive economic indicators. Growth-oriented stocks outperformed their value counterparts, while large-cap stocks notably outshone small-caps. A significant drop in Apple’s stock price, which carries substantial weight in the S&P 500 Index, was triggered by news that Chinese government employees would no longer be allowed to use iPhones. Additionally, concerns arose among investors regarding reports that the upcoming iPhone 15 would come at a considerably higher price point compared to current models. Declines in NVIDIA and other chipmakers further burdened the market. It’s worth noting that the markets were closed on Monday for the Labor Day holiday.

Although the week’s economic calendar wasn’t particularly crowded, it influenced market sentiment by consistently delivering positive surprises. The highlight was the Institute for Supply Management’s August services sector activity report, which unexpectedly surged to its highest level since February.

Furthermore, Thursday’s weekly jobless claims report surpassed expectations, indicating continued strength in labour two-year U.S. Treasury note yield demand despite a solid increase in the unemployment rate from 3.5% to 3.8% in August. Contrary to expectations of a slight increase, the number of Americans filing for unemployment in the previous week dropped to 216,000, the lowest level in six months. Continuing claims also decreased to 1.68 million, reaching their lowest point since mid-July.

The favourable jobless numbers prompted a rise in short-term bond yields, with the two-year U.S. Treasury note yield briefly crossing the 5% threshold on Thursday afternoon. The week began quietly in the tax-exempt municipal bond market as market participants awaited the release of significant new bond issues from California and the Port Authority of NY/NJ. These new bond offerings hit the market on Wednesday and dampened the secondary market as they were absorbed. The weakness in the secondary market persisted into Thursday, resulting in higher yields on intermediate AAA municipal bonds.

In the investment-grade corporate bond market, credit spreads widened only slightly on Tuesday despite considerable issuance following the holiday weekend. Later in the week, spreads tightened as issuance slowed down, and demand exceeded supply. The high-yield market saw below-average volumes and limited activity during the long weekend. Higher-quality bonds underperformed due to the rise in interest rates, and only a few new bond offerings were announced during the week.



In the realm of local currencies, the pan-European STOXX Europe 600 Index concluded the session with a 0.76% decline, driven by concerns that rising interest rates could nudge the economy towards a slowdown. Major European stock indexes followed suit, with Germany’s DAX retreating by 0.63%, France’s CAC 40 Index slipping by 0.77%, and Italy’s FTSE MIB sliding by 1.46%. In contrast, the UK’s FTSE 100 Index managed a modest gain of 0.18%.

Yields on 10-year sovereign bonds in Germany and Italy increased as worries about the eurozone’s economic health persisted. Meanwhile, in the UK, the yield on the 10-year government bond saw an uptick but pulled back from its midweek highs.

Revisions to Eurozone growth figures added to the gloomy economic outlook. The bloc’s GDP expanded by a mere 0.1% in the second quarter, with a decline in exports prompting Eurostat to revise its initial estimate of 0.3% growth. Retail sales volumes in the eurozone also experienced a sequential dip of 0.2% in July, reflecting weakened automotive fuel purchases. The year-over-year decline stood at 1.0%.

Investor sentiment in the eurozone took a larger-than-expected hit at the start of September, with Sentix’s index plummeting from -18.9 in August to -21.5. The report attributed this decline to a deepening slowdown in Germany, notably marked by a third consecutive monthly drop of 0.8% in German industrial production for July, driven by a substantial 9% decline in auto manufacturing.

Bank of England (BoE) Governor Andrew Bailey cast doubt on the possibility of an interest rate hike at the upcoming September 21 policy meeting. He said, “I think we are much nearer now to the top of the [interest rate] cycle,” highlighting that the decision is now more finely balanced. The BoE’s August business survey also indicated a potential easing of underlying price pressures, with companies expecting to raise prices by 4.9% over the coming year, down from 5.2% in the previous three months. Wage growth expectations remained steady at 5.0% over the next year, unchanged from July.


Japan’s stock markets displayed a mixed performance throughout the week, with the Nikkei 225 Index experiencing a 0.3% decline, while the broader TOPIX Index recorded a 0.4% gain. Investor sentiment was dampened by concerns about China’s economic slowdown and its potential impact on global demand.

The release of weak economic data further raised doubts about Japan’s economic health, as the second-quarter economic growth figures were revised downward. Japan’s gross domestic product for the second quarter of 2023 expanded by 4.8% quarter-on-quarter on an annualised basis, falling short of the initial estimates of 6.0% growth. Key components such as capital spending, private consumption, and public investment all exhibited softer-than-expected performance.

In this context, the 10-year Japanese government bond (JGB) yield remained within the 0.6% range. Despite the Bank of Japan’s commitment to keeping rates low through its yield curve control policy, the lacklustre demand observed at JGB auctions indicated that investors were holding out for higher yields.

The Japanese yen also weakened, reaching approximately JPY 147 against the U.S. dollar, marking its lowest level in over ten months, compared to about JPY 146 at the previous week’s close. This prompted Japan’s Ministry of Finance to issue its most robust warnings to date regarding potential foreign exchange market intervention to bolster the yen. Masato Kanda, the Vice Minister of Finance for International Affairs, expressed concerns about speculative actions in the market that fundamental factors couldn’t justify. He indicated that the government was prepared to respond appropriately without ruling out any options. Finance Minister Shunichi Suzuki reiterated these concerns, emphasising that authorities were closely monitoring the yen’s weakness with a sense of urgency. It’s worth noting that Japanese authorities last intervened in October 2022, buying yen and selling U.S. dollars to influence exchange rates.


Chinese stocks retreated as the most recent economic indicators heightened concerns regarding the country’s deteriorating economic prospects. The Shanghai Composite Index declined by 0.53%, while the blue-chip CSI 300 Index surrendered 1.36%. In Hong Kong, the benchmark Hang Seng Index also recorded a weekly decline, with financial markets closed on Friday due to severe flooding caused by a heavy rainstorm.

As measured by the private Caixin/S&P Global survey, the growth in services activity dropped to 51.8 in August, falling below expectations and down from July’s 54.1. Although the gauge remained above the crucial 50 threshold, indicating expansion for the eighth consecutive month, this marked the slowest increase since December. Lingering weak demand continued to exert pressure on China’s economy. This reading aligned closely with the previous week’s non-manufacturing Purchasing Managers’ Index (PMI), which also declined to its lowest level this year. Meanwhile, the official manufacturing PMI, while still in contraction for the fifth straight month, exceeded expectations slightly.

On the trade front, China’s exports contracted by 8.8% in August compared to the previous year, showing improvement from the steep 14.5% decline witnessed in July. Imports also saw a decrease of 7.3%. Both figures surpassed expectations. Some economists interpreted these data points as potential indicators that certain sectors in China’s economy might be stabilizing, particularly after the government implemented a series of policy measures aimed at stimulating demand.

In the currency markets, China’s renminbi currency reached a record low of 7.36 against the U.S. dollar in overseas trading. This depreciation followed the central bank’s decision to set its yuan fixing rate at a two-month low. The exchange rate dipped below the psychologically significant level of 7.35, approaching levels not seen since the inception of the offshore market in 2010. Pessimism surrounding China’s economic prospects and signs of resilience in the U.S. economy contributed to an increasing interest rate differential between the two nations, adding further downward pressure on the renminbi.

Market indices


  Local Currency Sterling Pound
Index Last week YTD Last week YTD
FTSE 100 0.37 -0.97 0.37 -0.97
S&P 500 -1.14 23.29 -0.08 18.78
Euro stoxx 50 -1.08 12.59 -0.68 8.9
Nikkei 225 -1.01 24.04 -0.79 6.78
Hang Seng -3.27 -2.78 -2.26 -6.68


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