Weekly Preview: August Week 2

Last week,

geopolitical risks had a negative impact on the E.U. Stock index in E.U. declined about 5%~9% in Southern Europe while France, Germany and U.K. defended the impact with 1.3%~2% drop. S&P 500 also tended to drop until the last day of the week, where it increased 1.15%. S&P 500 dropped 3.9% from July 24 to August 7.

With higher geopolitical risks, investors tend to look for safer asset like treasury. Oil price did not highly affected by the risk but there is still a possibility that it will affect the supply. As the days pass, geopolitical risks tend to have a temporarily effect.

This week,

• On Monday, there will be

1. Japanese M2 money stock
2. Japanese household confidence

• On Tuesday, there will be

1. Japanese industrial price index
2. French current account index
3. Italian CPI
4. German and E.U. Economic Sentiment Index

• On Wednesday, there will be

1. Korean imports and exports
2. Japanese GDP (prediction)
3. Chinese industrial outputs
4. French, German and Spanish CPI
5. U.K. unemployment rate and jobless claim along with chief of BOE speech
6. E.U. industrial outputs
7. U.S. retail sales and core retail sales with industrial inventory

• On Thursday, there will be

1. Korean unemployment rate with interest rate
2. U.K. house price
3. E.U., French and German GDP (prediction)
4. E.U. CPI and core CPI
5. Indonesian interest rate decision
6. U.S. import price index and jobless claim

• On Friday, there will be
1. No market in Korea, India and Italy (holiday)
2. U.K. GDP (prediction) with index of services
3. Hong Kong, Malaysia GDP
4. U.S. producer price index (and core), industrial outputs and Michigan sentiment index

Economic indicators in E.U. will tell how market goes this week. While Draghi said that ECB may put more stimulus on the economy, it is likely implemented if this week's indicators got worse. Unemployment rate and CPI will greatly affect E.U. and Fed's monetary policy. In case of Fed, it might decrease the interest rate early, but it depends on how labor market goes.

August Week 1 Market

30-year US treasury bond started at 3.30 this week and ended with 3.23 points while S&P 500 started at 1,926.26 and ended with 1,931.59. It closed at 1,909.78 on 7th but it rebound 1.15% increment on the 8th.

Trade volume at the last day of S&P 500 was the second-largest in three months. Without outstanding economic data, it indicates that people bought more stocks as economic rebound expectation raised. S&P 500 had dropped 3.9% from July 24 to August 7. As Ukraine crisis shows progress, expectation of rebound rose as well.

U.S. 30-year treasury keeps declining yield. As E.U. economy slows down and geopolitical risks hit the market, people tend to have safe asset.

USD appreciated against both Euro and KRW. USD tends to appreciate as geopolitical risk rises. Euro has been depreciated against USD as geopolitical risks rise and economic data (PMI, consumer spending, factory order, etc.) indicate slowdown in expansion. Italy even suffers from recession, which Draghi claimed it's a temporary.

KRW depreciated as geopolitical risk rises as well. Unlike Euro, its main cause came from Iraq.

Oil price increased when U.S. decided to airstrike Iraq. But easing Ukraine crisis and good U.S. economic data continuously declined the price.

Gold price also rose as people preferred safe asset, indicated by increase in volume; almost 7 peaks in three months. It is expected to decline as geopolitical risks ease and economic data shows progress next week.