Stocks delivered one of their worst weeks since August, when China’s devaluation and macro concerns sparked volatility. Every sector, save for Utilities, saw a sharp downturn as poor retail sales and earning reports combined with increased tightening chatter from Federal Reserve officials spooked markets.
Oil’s recent attempt to rally seems to have been cut short thanks to supply data indicating a surplus far higher than projections had estimated. Limited OPEC action and increased pumping by Iraq have helped to contribute to crude’s fall.
The dollar has taken a sharp jump over the past two weeks. With a strong jobs report for October expectations are that the Fed will likely move to raise rates in December. The dollar’s rise has sent the Euro and numerous commodities (oil, gold, etc.) to recent lows.
While China’s industrial sectors continue to struggle and miss expectations the Chinese consumer remains resilient. Strong retail sales give hope that a moderated transition is under way rather than a sharp fall.
China also announced that direct trading with the Swiss Franc will begin soon. The move is another example of how China is attempting to open up its capital account and internationalize its currency. The IMF may announce the inclusion of the renmibi as part of its SDR reserve formulation later this month.
A consensus is forming among the ECB’s council to move its main policy rates deeper into negative territory. Debate on extending QE, scheduled to end in September 2016, is still ongoing.
M&A activity remains strong thanks to record cash piles and cheap rates. AB InBev announced an agreement to acquire SABMiller in what will form the largest brewer in the world by far. The deal is valued at over $100 billion.