So a lot happened this week.
Most significant for me were the comments from Federal Reserve Chair-woman Janet Yellen who said that she felt it was ‘appropriate’ to expect a tightening in US interest rates this year.
I actually interpret this constructively, and the simple reason is that I think some of the added nervousness to markets stems from a concern the Federal Reserve had lost the will to change course on 8 years of highly expansionary monetary policy.
I know this sounds odd, but I think the market is genuinely ready for the rate rises and the contraction in US money supply, and the sooner the Fed peels off the band-aid the greater chance we have of business as usual returning.
I could go into greater details about the negative ‘signalling’ effect of the Fed NOT changing rates, but don’t want to spoil your weekend – please call if you want to chat further.
In China we saw the preview manufacturing data for August revealed, showing the weakest pace of activity in over 5 years.
This shouldn’t be a surprise. In fact, recent broker reports on industrial activity points to a continued stagnation.
China is a tricky one, since I think many of the reforms being passed are highly constructive, but yet the mainland market still doesn’t look cheap.
Conversely, non-mainland Asian shares are actually looking very cheap and at or around the lows seen in previous downdrafts. I feel much of Asia is increasingly near a low, but needs some positive news out of China to kick-start the buying.
In Europe, there were comments from the ECB Governor Mario Draghi this week. In essence he said it was too soon to expect more QE (Quantitative Easing/money printing), but that understandably it was not beyond the realms of possibility.
I didn’t pay too much attention to these remarks in truth, as the ECB policy has drifted into the background near term.
More interestingly, and staggeringly, in Europe was the scandal engulfing Volkswagen (VOW) and subsequently BMW (BMW) over revelations the car companies had manipulated emissions data to pass the environmental tests.
Check out our facebook page over the weekend as I will post an article highlighting the scandal, as I’d have called it preposterous had it not been true.
Have a great weekend.
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