Market Action

• All three U.S. averages overcame a turbulent week to post slight gains on the week. Energy stocks led the way despite further declines in the price of crude oil.
• China’s devaluation sparked volatility across asset classes this week. The People’s Bank of China announced that markets would play a greater role in determining the currency’s value on each day’s opening but maintained a strict 2% trading band.
• China’s currency move pushed oil down to its lowest point since the Financial Crisis and weakened Emerging Market currencies further, as analysts debated whether the policy shift signaled an implicit concern over growth or an attempt to appease the IMF and curry favor towards SDR admission.
• Brazil’s debt rating was moved to junk territory by Moody’s on Tuesday. The adjustment was long expected and overdue as the South American country struggles with low commodity prices, a wasteful public sector, and inflationary pressures.
• Productivity data came in weaker than anticipated this week while labor costs edged higher compared to previous periods. The data points continue the theme of a murky economic landscape in the U.S. as the Fed debates a rate rise next month.
• An economic advisor to Japanese PM Shinzo Abe stated that if the economy doesn’t pick up quickly a $20 billion stimulus might be in order. With his approval ratings near 40% the Prime Minister may not have the political capital to make such a move.
• European finance ministers agreed to a third bailout for Greece. The €85 billion deal demands big changes to Greece’s privatization scheme and spending plans in exchange for the additional capital. The deal comes in time for a payment due to the ECB on August 20^th.
• Analysts in the energy market are pushing out their timeline for when they think the current supply glut will be balanced out. Forecasts are now aiming at the end of 2016 before demand will catch up.

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