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Notes from the Trading Desk – Franklin Templeton

Franklin Templeton’s Notes from the Trading Desk offers a weekly overview of what our professional traders and analysts are watching in the markets. As part of Templeton Global Equity Group, the European equity desk is manned by a team of professionals based in Edinburgh, Scotland, whose job it is to monitor the markets around the world. Their views are theirs alone and are not intended to be construed as investment advice.

The digest

Last week equity markets drifted lower in quieter trading given the Monday US Labour Day holiday. In the United States, weaker performance from some technology heavyweights weighed on the market. In addition, solid US macro data prompted some to suggest it would lead to a more hawkish Federal Reserve (Fed) stance. Weaker macro data weighed on markets in Europe and Asia. Last week, the MSCI World Index declined 1.4%, the STOXX Europe 600 Index declined 0.8%, the S&P 500 Index declined 1.3% and the MSCI Asia Pacific declined 1%.1

Week in review

United States

US equity markets were lower in a holiday-shortened week, with the S&P 500 Index down 1.3%, but staying above support at 4450, closing at 4457. Elsewhere, the Dow Jones Industrial Average held up slightly better, declining only 0.7%, while the Nasdaq 100 declined 1.4% and Russell 2000 declined 3.6%.

In terms of drivers, investor focus is mainly on the upcoming Fed meeting (20 September), and some stronger macroeconomic data suggested the possibility of a more hawkish tilt. Of note, the Institute of Supply Management (ISM) Services Index hit a six-month high of 54.5. Last week, Dallas Fed Bank President Lorie Logan and Fed Governor Christopher Waller both suggested a pause in policy adjustments ahead. The market does not see much chance of a rate move in September, with only a 7% chance of a rate hike currently, so focus will be on the tone of the commentary.

Over the weekend, US Treasury Secretary Janet Yellen stated she felt confident that the US will avoid a recession.

Elsewhere, shares of Apple fell 6% last week amidst reports that China banned government employees from using iPhones and other Apple devices at work. Recall that much has been made of how a few tech heavyweights have driven US market index gains of late, so any weakness in the sector is likely to cause concern.

Finally, The US dollar gained ground in the last eight weeks, which represents its longest run of positive weeks since 2005.Several factors have been at play, including weaker sentiment in other regions, particularly Asia and Europe.


European equities drifted lower last week on lighter trading volumes (US Labour Day having an impact). While no single-day move was huge, the eight consecutive down days in the STOXX Index marked the worst run since 2016. Thankfully, a small gain on Friday (+0.2%) ended that run. Sector-wise, media stocks were strong, while luxury goods were the weakest.

Macro data and central bank speakers were front and centre, as the theme in Europe remains one of slowing growth. German Factory Orders and Industrial Production reports last week both came in well below expectations, while Purchasing Managers Index (PMI) data out of Spain and Italy were weak. The Eurozone Composite PMI was revised lower to 46.7, down from the previous estimate of 47.0.

Italian and German government bond spreads widened. last weekend saw three pieces of news raising fiscal concerns in Italy: new, higher, spending estimates for the Superbonus tax breaks; stabilizing but a still-high year-to-date cash deficit; and faltering gross domestic product (GDP) growth.

Elsewhere, some borderline hawkish commentary from Bundesbank President Joachim Nagel started to move European Central Bank (ECB) rate-hike pricing higher when he said it would be premature to speculate right now about rate cuts.  The market is pricing a 37% probability of a rate hike on September 14.

Corporate loan costs might be another area to keep an eye on, as some reports are showing potential signs of credit distress.

Looking at fund flows, Europe-focused equity funds recorded a 25th consecutive weekly outflow (US$0.32 billion last week), but it was the second-smallest in 2023. Europe-focused funds have seen US$49.2 billion of outflows year-to-date, mostly from active funds.

Switzerland has seen the largest inflows this year (US$1.3 billion), while the United Kingdom has recorded the largest outflows (US $23.5 billion).


Last week Asian stocks weakened a bit.

The MSCI Asia Pacific closed the week down 1%, reflecting the concerns about the Chinese economy, US-China geopolitical tensions and continued concerns around the weaker Japanese yen and Japan’s yield-curve control (YCC) policy.

In Australia, the Reserve Bank of Australia kept interest rates unchanged, but indicated some further rate hikes may be needed, depending on what the data show. This week so far, better-than-expected China lending data and further verbal support around China’s currency are aiding market sentiment. Bank of Japan Governor Kazuo Ueda suggested that the central bank might normalize interest rate policy by year end.


The Nikkei closed last week down 0.32% as the usual concerns over a global slowdown and demand drop off impacted markets.

A downward revision to second-quarter growth (4.8%) weighed on markets.

The other focus last week was the weaker yen. The government issued a warning against speculators without giving many details. Ueda’s hawkish comments over the weekend drove a near-1% surge in the yen as we kick off the trading week.

Looking at sectors, refiners and mining stocks were the best performers last week after OPEC+ prolonged oil supply curbs.

Outperformance in real estate stocks was also notable, with the sector appearing to be benefit from foreigner-driven rotation out of China into Japan after the weaker China August macro data.

On the flip side, technology/semiconductor stocks declined after the news that China is seeking to broaden its iPhone ban to state firms and agencies.


The Shanghai Composite Index closed the week down 0.53%, mainly due to weaker macro data and heightening geopolitical tensions.

The Caixin August Manufacturing PMI survey came in at a below consensus 51.8, the slowest increase since December, but still in expansion territory (50 or above).

However, there was some slightly softer import/export data, with many commentators suggesting the government’s efforts to boost demand are starting to kick in.

As noted, one of the main headlines last week was the government’s ban on certain employees from using iPhones in the workplace, which led to a >6% drop in Apple’s share price.

On a more positive note, the government started to deliver on the property demand boost policies which were signalled previously. Local government subsidies/relaxations were the main focus, along with bank interest-rate cuts on existing mortgage loans.

Hong Kong

The Hang Seng Index closed the week down 0.98%, mainly on the read across from weaker Chinese markets. It didn’t help that the markets were closed on Friday due to a heavy rainstorm that flooded the city.

Shares of Chinese developers rallied after more “Tier 1” cities let first-home buyers enjoy preferential rates on mortgages.

Chipmakers were in focus last week after Huawei was reported to have built an advanced seven-nanometer processor to power its latest smartphone supplied by SMIC. Meanwhile, China will reportedly set up a US$40 billion state fund to boost the chip industry.

Shares of Chinese airlines followed overseas peers lower after Brent crude oil rose above US$90 a barrel for first time since November, as the largest OPEC+ producers extended their supply cuts to year-end. Supply chain names tied to Apple were under pressure.

The week ahead

Two events stand out this week: the US Consumer Price Index (CPI) report on Wednesday and the ECB policy meeting on Thursday. Worries of stagflation remain a concern in Europe, so odds of a rate hike are less than 50% at present. A number of data releases in China will also capture attention, including the August CPI and Producer Price Index (PPI) reports on Saturday, August foreign direct investment (FDI) on Monday, and August Industrial Production (IP) and retail sales reports on Friday.

Monday 11 September

  • EU 2023 Interim Economic Forecast
  • Germany August Wholesale Price Index
  • Italy July IP
  • Norway CPI & PPI including oil
  • Bank of England’s (BoE’s) Pill speaks
  • Chinese Money Supply

Tuesday 12 September                     

  • EU, Germany Sep ZEW Survey Expectations
  • UK Aug Payroll Change, Jobless Claims, July Average Earnings
  • Sweden PES Unemployment Rate
  • Spain CPI
  • Bank of England’s Mann speaks

Wednesday 13 September

  • Eurozone July IP
  • UK July GDP, IP, Index of Services, Trade Balance
  • Italy Unemployment Rate Quarterly
  • US August CPI, Average Earnings, Monthly Budget Statement
  • Japanese PPI

Thursday 14 September    

  • UK August House Price
  • ECB Policy Meeting
  • Sweden CPI
  • US Initial Jobless Claims, August Retail Sales, PPI, July Business Inventories

Friday 15 September

  • EU July Trade Balance, Second-Quarter Labour Cost
  • UK BoE releases inflation expectations
  • Norway Trade Balance
  • France CPI
  • Italy CPI & Trade Balance
  • US August Export & Import Price Index, IP; September Empire Manufacturing, University of Michigan Sentiment survey
  • People’s Bank of China One-Year Lending Facility Rate


Franklin Templeton Key risks & Disclaimers:

What Are the Risks?

All investments involve risks, including the possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested.  Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity.

Any companies and/or case studies referenced herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. The information provided is not a recommendation or individual investment advice for any particular security, strategy, or investment product and is not an indication of the trading intent of any Franklin Templeton managed portfolio.

Past performance is not an indicator or guarantee of future performance. There is no assurance that any estimate, forecast or projection will be realised.

This article reflects the analysis and opinions of Franklin Templeton’s European Trading Desk as of 11th September 2023, and may vary from the analysis and opinions of other investment teams, platforms, portfolio managers or strategies at Franklin Templeton. Because market and economic conditions are often subject to rapid change, the analysis and opinions provided may change without notice. An assessment of a particular country, market, region, security, investment or strategy is not intended as an investment recommendation, nor does it constitute investment advice. Statements of fact are from sources considered reliable, but no representation or warranty is made as to their completeness or accuracy. This article does not provide a complete analysis of every material fact regarding any country, region, market, industry or security. Nothing in this document may be relied upon as investment advice or an investment recommendation. The companies named herein are used solely for illustrative purposes; any investment may or may not be currently held by any portfolio advised by Franklin Templeton. Data from third-party sources may have been used in the preparation of this material and Franklin Templeton (“FT”) has not independently verified, validated or audited such data. FT accepts no liability whatsoever for any loss arising from use of this information and reliance upon the comments, opinions and analyses in the material is at the sole discretion of the user. Products, services and information may not be available in all jurisdictions and are offered by FT affiliates and/or their distributors as local laws and regulations permit. Please consult your own professional adviser for further information on availability of products and services in your jurisdiction.

Issued by Franklin Templeton Investment Management Limited (FTIML) Registered office: Cannon Place, 78 Cannon Street, London EC4N 6HL. FTIML is authorised and regulated by the Financial Conduct Authority.


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This information has been accurately reproduced, as received from Franklin Templeton Investment Management Limited (FTIML). No information has been omitted which would render the reproduced information inaccurate or misleading. This information is being distributed by MeDirect Bank (Malta) plc to its customers. The information contained in this document is for general information purposes only and is not intended to provide legal or other professional advice nor does it commit MeDirect Bank (Malta) plc to any obligation whatsoever. The information available in this document is not intended to be a suggestion, recommendation or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.

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