Week in a Glance: Japan's GDP, Pandemic, Brexit, OPEC + and FED

The past week was quite rich in movements in the financial markets, but it cannot be said that they brought any clarity to the foreseeable future. This was largely due to rather contradictory news.

The week started with extremely weak data on Japan's GDP (-27.8% - this is the worst indicator in the entire history of observations). After that the trend for weak data and gloomy economic forecasts for the week was set.

On Wednesday, the Fed noted that the US economy is recovering more slowly than it could, especially the consumer sector. At the same time, the Central Bank confirmed its unwillingness to expand monetary incentives, citing the greater efficiency of fiscal instruments. But in this regard, the past week has gone without any progress, as Democrats and Republicans have not yet come to an agreement.

On Thursday, gloomy data were confirmed by an increase in the number of initial jobless claims in the United States (exceeded to 1.1 million). On Friday, Markit PMIs showed that European economic recovery slowed sharply.

This is largely due to the second wave of the pandemic in Europe: in Germany, France, Spain, a sharp increase in the number of cases was recorded to levels unseen since April-May.

Last week, another round of negotiations took place between the EU and the UK. With less than 2 months left before the consensus should be formed, each new round of negotiations is becoming more important, if not critical. Still the sides have not yet found a common ground. This means that the chances of a “hard” Brexit are growing. With all that it implies for the pound, which went on sale on Friday.

Another important meeting last week was the meeting of the OPEC + Monitoring Committee. There were no particular surprises. The level of compliance in July decreased, but the Committee threatened the guilty with fines. In general, despite the decline in US oil reserves, the fundamental background around oil does not give us any reason to change our recommendation from “sell from current”.

The upcoming week will be pretty desaturated (in theory) with news, so you can try to enjoy the last week of the summer and prepare for increased volatility as financial markets return from their summer hibernation. Although the annual Jackson Hole symposium can make a difference in the way the markets are going.