Another rollercoaster week ended with the S&P 500 down -1% and long-dated Treasury yields pushing all-time lows of below 2%. The Dow Jones Industrial Average fell more than -3% on Wednesday alone (which nowadays can be exaggerated as the fourth ever >800 point fall) but retraced half of this loss by weekend to close down -1.5%. Earlier in the week, positive news that Trump had delayed some of his proposed China tariffs until mid-December supported markets for less than a day. The next morning trade-war rhetoric was followed by multiple weak economic data releases and the inevitable inversion of the US yield curve giving the press plenty of column ammunition to stoke the fear. 10-year Treasury yields fell a further 10 basis points to close the week at 1.55% with the 30-year moving 22 basis points to 2.04%; respectively the have fallen 52 and 56 basis points over the past 3 weeks.
Perhaps the most notable weak economic data was German GDP which came in at -0.1% for Q2 (the second time in 12 months) signalling both weak domestic and international demand. As such, Bund yields fell a further 11 basis points to -0.69%! Alongside China cutting its growth forecast to 6%, latest industrial production measures hit a 17-year low of 4.8% year-on-year. However, US retail sales of 5.1% was a spanner of optimism in the otherwise bearish tone across China and Europe; as is economic growth in Japan with an annualised Q2 GDP reading of 1.8% encapsulating upside surprises in both domestic private consumption and investment. Also last week, many emerging market investors got burned (some more than others) with the surprise primary election upset in Argentina causing the peso to plummet 25%, its equity markets to half, and its bonds to fall in value by almost 40% over the few days following the upset.
Turning to the economic agenda: the week starts with Eurozone CPI data on Monday; Germany PPI and Reserve Bank of Australia minutes released on Tuesday; with FOMC minutes out on Wednesday. Thursday sees PMI data across the US, Eurozone, France and Germany, as well as Eurozone consumer confidence; with Japan CPI data on Friday.