Jittery markets dominated most of the last week as geopolitical risks between the U.S. and North Korea rattled participants, who then flocked towards risk averse assets. Gold rose about 2.7%, as major U.S. stock indices all ended the week lower, including the S&P, Nasdaq, and Dow & Jones. The U.S. Dollar index also declined, as well as 10-year treasury yields, which fell about seven basis points over the past five days as of Friday.
July inflation data, released on Friday, remained subdued for a fifth consecutive month, raising some doubts as to whether the Fed can reach it 2% target and if the Fed may stay on track for another rate hike for this year. The consumer price index rose 0.1% in July, seasonally adjusted. The Fed’s Robert Kaplan wants to see further progress in reaching the Fed’s inflation target, according to comments post the report.
As some of the U.S./N. Korea concerns dissipated towards the end of the week, the market did see a slight decline in volatility. We expect relatively thinly traded markets to continue as many Wall Street types will likely be on vacation during the second half off of August. The market does have an eye on upcoming German elections in September, although it is widely expected that incumbent Angela Merkel will remain in power.
Major economic releases this week include retail sales (Tuesday), the FOMC minutes (Wednesday), housing starts (Wednesday), industrial production (Thursday), Philly Fed business outlook (Thursday) and jobless claims (Thursday). The Fed’s Neel Kashkari is scheduled to speak on Thursday while Kaplan is meant to speak on both Thursday and Friday.
Overseas, the Reserve Bank of Australia, releases its minutes on Monday, with the market focused on employment data to be released on Thursday. A slew of economic data will come from right across the Atlantic, including German GDP data (Tuesday), GBP inflation (Tuesday), Q2 Euro GDP data (Wednesday) and Euro inflation and trade balance data (Thursday).
