Market Snapshot

Global markets continued movement within a mixed, sideways trend this week, with US equities remaining in neutral territory while European and Japanese markets experienced a build-up in downwards pressure. US Markets were unable to break overhead resistance levels and continued to trade within a neutral trend that has characterized the past three weeks of trading. The S&P 500 closed in marginally negative territory, down roughly three basis points for the week following a late-week rebound from the lows approached on Wednesday. The NASDAQ composite ended slightly higher, moving up 10 basis points, while the Dow Jones Industrial Average declined by roughly 0.13%.

While bearish pressure has certainly increased, much of the pessimism has been countered by a rallying energy market, moving higher on the backs of a trend reversal in commodities. WTI Crude Oil contracts dated for September 2016 have climbed by nearly 9% this week after bottoming at $39 earlier in the month. Speculation on a developing production quota has increased following statements issued by OPEC officials and leaders within the energy sector, particularly comments by Saudi Arabia’s Minister of Energy, Khalid Al- Falih, in which he claimed that the upcoming International Energy Forum meeting in Algeria will provide the best opportunity to discuss accommodative policy measures. Additionally, supply inventories have aided oil bulls’ efforts, with the EIA recording substantial withdrawals from US oil supplies.

European and Asian markets faltered on suspected over-valuations following last week’s significant rally along with concerning economic data placing certain macro-perspectives in jeopardy. The German DAX 30 declined by over 1.5% this week, while the French CAC 40 and Spanish IBEX 35 fared worse, both falling over 2.5%. The British FTSE 100 moved lower by over 80 basis points, faring better against increased market pessimism due to positive retail sales data offsetting other economic concerns.

The Japanese Nikkei 225 declined by 2.23% this week due to a worsening economic outlook as a result of Q2 GDP reports released on Sunday. The Japanese Cabinet Office reported no increase in GDP for the second quarter, failing to meet the market’s forecasted growth rate of 0.2%. Additionally, the Japanese government’s yearly outlook has been reevaluated, with Year-over-Year growth expectations moving down from 2.0% to 0.2%. Capital Expenditure also saw a reduction for the quarter, declining by 0.4%. This is an indication that current BoJ policy may not be accommodative enough, suggesting that the country’s massive policy projects led under Prime Minister Shinzo Abe have failed. However, if Japan stays consistent with its long-term economic goals, policy efforts are likely to increase, providing support for their equity market.

The US Dollar experienced substantial losses as the global economic outlook and market sentiment changes, with the US Dollar Index, a basket currency index pairing the US dollar’s value against other major foreign currencies, declining by 1.25%. A stabilized global outlook has aided bearish momentum along with mixed domestic economic data. This has had a substantial impact on other markets by providing bullish support both to commodities and equities due to the commodities market dollar-pricing bias and the increased return on foreign investment.