Picture your Future. Save for it by earning 1.5% on a 1-year Term Deposit Account! Learn more.

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

Equity markets ended August on a positive note, with Chinese stimulus aiding sentiment, along with global macro data releases that increased hopes central banks would pause their rate-hiking cycles. Trading volumes were still relatively subdued, with the UK equity market closed last Monday and the US market closed for the 4 September Labour Day holiday. Last week, the STOXX Europe 600 Index closed up 1.5%, the MSCI World Index was up 2.7%, the S&P 500 Index was up 2.5%, and the MSCI Asia Pacific Index was up 2.9%.

Week in review

Europe

Equity markets in Europe traded higher into month-end, with volumes much better than the prior week thanks to a MSCI rebalance on Thursday. The STOXX 600 Index moved back above its 200-day moving average, a key technical indicator, and comfortably above support at 450. Some China-exposed sectors, such as EU luxury, continued to struggle.

Looking at fund flows, European equities have seen outflows for the past 25 weeks (US$0.3 billion in the latest week of data).

European inflation data was a focus last week, with a glut of European datapoints out. The eurozone Core Consumer Price Index (CPI) came in at 5.3%, in line with expectations and down from 5.5% prior. Headline CPI was a touch higher than expected, at 5.3%. With that, there was no strong indicator on what the European Central Bank (ECB) will do at its next meeting on 14 September and the market is unsure, currently pricing a 25% chance of a rate hike.

ECB speakers are keeping their options open, with ECB Executive Board member Isabel Schnabel saying: “Should we judge that the policy stance is inconsistent with a timely return of inflation to our 2% target, a further increase in interest rates would be warranted. Should our assessment of the transmission of monetary policy suggest that the pace of disinflation is proceeding as desired, we may afford to wait until our next meeting to gather more evidence”.

In the United Kingdom, house prices fell at the fastest rate since 2009, with the average house price declining by 5.3% last month compared to last year.

United States

Last week was positive for US equities markets ahead of the Labour Day holiday, with the S&P 500 Index up 2.5%. Technology stocks led the way, with the Nasdaq 100 Index up 3.7% and the FANG+ Index up 4.3% (back close to all-time highs).

Several data releases out last week helped drive an increasing view the US economy may see a “soft landing”. Earlier in the week, ADP and JOLTS jobs data figures were both weaker than anticipated, and on Friday, the important US monthly employment report saw unemployment rise to 3.8% in August. Nonfarm payrolls came in at 187,000 (steady with the prior month) and average hourly earnings rose 0.2%. Investors took the view that these prints reduce the chance of a Federal Reserve (Fed) interest-rate hike in September. The market is now pricing in a 6% chance of a 25-basis-point (bps) hike in September versus 21% chance at the end of last week. In that context, the US 10-year Treasury yield fell 5.8 bps on the week.

Commodities were stronger, with West Texas Intermediate crude oil up 6.8%, hitting US$85 per barrel for the first time since November as Russia has agreed with its OPEC+ partners on further cuts to its crude oil exports.

Investor sentiment improved, with the CNN Fear & Greed Index edging into “Greed” territory. 

Asia

Last week was a good one for equities in Asia, with the MSCI Asia Pacific Index up 2.8% and all major markets in the region up around 2%-3%. Sentiment that the US rate-hiking cycle may be coming to a possible end, along with China’s efforts to stimulate its economy, drove gains.

Japan

The Nikkei Index closed up 3.4% last week, and all sectors were positive.

On the macro front last week, employment data was a bit weak, with unemployment rising to 2.7% in July. Also, the government announced measures to control record high petrol prices and to extend its subsidy program—all good of course for helping to control inflation.

China

Mainland equities in China had a good bounce last week, closing up 2.26% after the China Securities Regulatory Commission (CSRC) rolled out supportive measures last weekend, including a 50% cut in the stamp duty to 5 bps, and tightening rules around IPO/refinancing/stake cutting by controlling shareholders.

It was a mixed macro data picture. China’s August official Manufacturing Purchasing Managers Index (PMI) came in at 49.7 (better than expected), while the non-manufacturing index was 51 (slightly worse than expected). The Caixin August Manufacturing PMI stood at 51.

Hong Kong

Hong Kong’s equity market had a good week last week, closing up 2.37%.

Stocks started the week higher after China’s stamp duty cut, while multiple regulators vowed to prevent financial risks.

China’s Minister of Commerce met with US counterpart Gina Marie Raimondo and separately published statements after forming a joint working group on trade issues.

However, market momentum faded towards the end of the week after a government report showed that the slump in manufacturing activity persisted in August.

The week ahead

It looks like a quieter week ahead in terms of catalysts, starting with the US market close Monday for the Labour Day holiday. Of note, the Reserve Bank of Australia holds a policy meeting on Tuesday, and global PMI data, Chinese CPI, and Japanese gross domestic product (GDP) releases are due out later in the week.

Monday 4 September

  • Germany Foreign Trade
  • Switzerland GDP
  • Spain Unemployment Change
  • Eurozone Sentix Investor Confidence
  • Japan All Household Spending

Tuesday 5 September                    

  • Spain Services & Composite PMI
  • Italy Services & Composite PMI
  • France Services & Composite PMI
  • Germany Services & Composite PMI
  • Eurozone ECB one-year and three-year CPI Expectations
  • Eurozone Services & Composite PMI
  • UK Services & Composite PMI
  • Eurozone PPI
  • US Factory Orders and Durable/Cap Goods Orders
  • Caixin Chine PMI

Wednesday 6 September

  • Germany Factory Orders; Construction PMI
  • UK Construction PMI
  • Eurozone Retail Sales
  • China: Trade Balance
  • US Mortgage Apps; Trade Balance; PMI-Services (revision); ISM-Services; Fed Beige Book

Thursday 7 September    

  • UK Decision-Maker Panel Survey
  • Netherlands Consumer Spending
  • France Total Payrolls & Wages; Trade Balance & Current Account Balance
  • Switzerland Unemployment Rate; Foreign Currency Reserves
  • Germany Industrial Production
  • Spain INE House Price Index
  • Italy Retail Sales
  • Eurozone GDP & Employment
  • US Continuing Claims & Nonfarm business productivity (revised)

Friday 8 September

  • Netherlands Industrial Sales & Manufacturing Production
  • Sweden GDP Indicator, Household Consumption, Private Sector Production, Industry Service & Production Value, Initial Orders
  • Germany CPI
  • France Industrial & Manufacturing Production
  • Spain Industrial Output
  • Canada Labor Force Survey
  • China CPI
  • Japan GDP

 


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 4th 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.

 

MeDirect Disclaimers:

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.

The financial instruments discussed in the document may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.

If you invest in this product you may lose some or all of the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment. Any income you get from this investment may go down as well as up. This product may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund should always be based upon the details contained in the Prospectus and Key Information Document (KID), which may be obtained from MeDirect Bank (Malta) plc.

Join MeDirect today to access the tools you need to put your money to work on your own terms.

Latest news articles

Playing demographic divergence now
All News

BlackRock Commentary: Playing demographic divergence now

The working-age populations in developed markets (DMs) are dwindling, contrasting with the growth observed in emerging markets (EMs). This trend adversely affects economic growth in DMs while bolstering growth prospects in EMs—a divergence that, according to BlackRock, is widely evident in asset valuations.

Hacktivism is hacking but for a political or social cause, rather than just for money. This article explores the threats from hacktivists and the ways to defend yourself and your organisation.
All News

As elections loom, beware of hacktivism

Hacktivism is hacking but for a political or social cause, rather than just for money. This article explores the threats from hacktivists and the ways to defend yourself and your organisation.

When building an investment portfolio, make sure to keep track of the fees and expenses you are being charged to trade or hold specific assets. This will help you ensure you enjoy the best possible returns from your money.
All News

Investing: Understanding Fees and Expenses

When building an investment portfolio, make sure to keep track of the fees and expenses you are being charged to trade or hold specific assets. This will help you ensure you enjoy the best possible returns from your money.

Experience better Banking

The sooner you start managing your money, your way, using the best-in-class tools, the sooner you’ll see results. 


Sign up and open your account for free, within minutes.

MeDirect_Multi-Devices-cards

Login

We strive to ensure a streamlined account opening process, via a structured and clear set of requirements and personalised assistance during the initial communication stages. If you are interested in opening a corporate account with MeDirect, please complete an Account Opening Information Questionnaire and send it to corporate@medirect.com.mt.

For a comprehensive list of documentation required to open a corporate account please contact us by email at corporate@medirect.com.mt or by phone on (+356) 2557 4444.