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Steve Miley’s What to Watch This Week – 19th August

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Updated: 07 September 2020

Global financial asset clauses are still at the whim of the trade war between the US and China, with volatile price action continuing to dominate across financial markets. Mid-August has seen frequent leaks, rumours and statements from both the China and the US, snowballing the market volatility evident since the latest bout in the conflict from early August.

Not only are global share markets and stock averages reacting aggressively, but Foreign Exchange Commodity markets and Government Bond have all seen significant price moves.

The forceful push lower in US Treasury Bonds yields, in the case of the US 30-year Bond to an historic low yield, has emphasised concerns regarding the US and global economic outlook.

Critically, the past week has seen an inverting of the 2/10 year sector of the US Treasury yield curve. This is of particular note and has seen media attention as statistically in the past, the inversion of this part of the US yield curve has signalled a US recession.

Moreover, it is not only US Bond hitting multiyear or historic yield lows with the German 10-year yield also at historic negative yield levels.

However, it is not all negative, hence the volatile price action across asset classes. The US and China have stated that trade talks are due to recommence later in August and the US declared that the latest tariffs to be imposed on Chinese goods would be delayed until year end, December 2019.

Furthermore, over the past week US data has been fairly resilient, with both US Retail Sales and CPI (Consumer Price Inflation) data coming in better than forecasters had estimated.

An issue remains in Europe, however, with German Gross Domestic Product quarterly data coming in at -0.1%, with European data broadly disappointing.

Over this weekend, the PBoC in China unveiled reforms to lower borrowing costs and interest rates to corporates, which should help Chinese, Asian and global markets begin this week on a positive footing (after global equity markets posted solid closes on Friday).

Key to Watch

Key again to watch for the week will be any news on the trade conflict.

On Wednesday the Federal Market Open Committee Meeting Minutes from the last meeting are published, whilst Thursday brings the global Purchasing Managers Index (PMI) data.

Another critical area to monitor from Thursday through to Saturday will be the Economic Symposium taking place at Jackson Hole.  Federal Reserve Chairman Powell is due to speak Friday.

Macroeconomic focus

  • Monday: Nothing of note
  • Tuesday: Reserve Bank of Australia Meeting Minutes
  • Wednesday: Federal Market Open Committee Meeting Minutes
  • Thursday: Jackson Hole Economic Symposium; global PMI
  • Friday: Jackson Hole Economic Symposium; Federal Chairman Powell speaks

Earnings reports (US unless stated)

  • Monday: BHP Group (UK)
  • Tuesday: Home Depot; Medtronic
  • Wednesday: Lowe’s; Target
  • Thursday: Salesforce