As we look back at August, the month saw a strong performance for global developed market equities gaining over 6% in US $ terms to record their best August month since 1986. Regionally, US equities led Europe over the month, as the risks of a second virus wave, as well as EUR currency strength, weighed on European recovery hopes. Technology globally continued to lead at a sector level.
Today, markets will be digesting the final purchasing manager survey readings of business activity for countries and regions for August.
The recently released provisional readings saw the Euro Area lose some momentum into August, which might challenge the region’s more cyclically-dependent recovery hopes if this is borne out in today’s data.
Ahead of a planned resumption of UK-EU talks, Germany has vented its frustration with the lack of progress by taking Brexit off the agenda at a planned meeting of EU ambassadors on Wednesday.
With the UK and EU still far apart on a number of issues, this risks raising volatility for UK and EU currencies and risk assets. Finally, with US Congress still in recess this week and hopes for additional stimulus on hold, for now, markets will likely focus on the US jobs report for August due on Friday. With US elections fast approaching, this report takes on greater significance.
Against an unemployment rate of 10.2% in July, markets are looking for 9.8% for August, which if correct would be the 4th monthly fall in a row.