October Week 3

     S&P 500 sparked up 4.24% this week with bright light from eurozone and China. China showed a stronger GDP than its forecast; it inclined by 7.3% YoY (forecast 7.2%). It shows that global economy in Q3 was stronger than what the market saw. The strong GDP implies that the world economy will rebound back in the following time period, which increases investors expectations along other issues. In the market on Tuesday, there was a rumor that the ECB will purchase corporate bond, which later claimed that it is not confirmed 'yet.' But this rumor was huge enough to impact on the market.

      Within the U.S. market, several companies showed unexpectedly positive earnings, which led to an increase of S&P 500. The UPS, Catapillar, Boeing Inc, Apple and P&G all showed high earnings while IBM, Amazon Coca-Cola and McDonald had an below-expected earnings. But those large companies with high earnings, low gas price, stabilizing job market and CPI led a market this week.

 


      Europe had a good week; the DAX increased by 2.03%, FTSE 100 for 1.38% and CAC 40 rose by 3.15%. Like the U.S. market, the EUwas affected by China GDP and rumor of the ECB corporate bond purchase. Along that, strong PMI in Germany and EU led the market this week. The markets finally started to bound back.

     Last week, one of the reasons EU markets declined was from Germany that its ZEW Economic Sentiment unexpectedly fell down (actual was -3.9 compared with 6.9 previous month). Yet this week Germany showed a strong PMI of 51.8 (forecast 49.5). The EU Manufacturing PMI was 50.7, which was also higher than the forecast of 49.9. Those strong economic indicators led the market increase. Also U.K. GDP resulted as 3.2% increase in this quarter, which is declined by 0.2% from previous quarter. Yet this 3.0% increase still meets the government target, it had a limited affect on the market this week. With stabilizing housing price and retail sales, U.K. market seemed to follow EU economic sentiment.

     This week's global issue came from Asian market. The above-expected China GDP helped the U.S. and Europe but not Asian markets.

     The Shanghai Composite Index declined by 1.87% this week as the strong GDP and labor market suggested less government stimulus in the market. The reason the Chinese government considered additional stimulus in the market was they were worried about slow economy, especially in manufacturing sector and real estate market. Yet the strong GDP and labor market, and high PMI shows that the Chinese economy is doing much better than that they thought. As the expectations faded away, the Shanghai Composite Index declined with positive economic indicators.

 


     EUR/USD unchanged this week, and USD/JPY increased by 1.26%. The Japanese prime minister, Abe Shinzo, stated this week that they might postpone sale-tax increase. Along with the current government policies, it had a positive impact on the market to depreciate the JPY.