The week started with a positive tone as Asian and European session traders took cues from Friday's weak U.S. jobs report and the possibility of the Federal Reserve not tightening its policies further. Risk appetite was also supported by news that China's property giant, Country Garden, avoided default by paying coupons on its onshore bonds. However, the sentiment shifted later in the week due to increasingly strong US economic data (and the prospect of higher for longer rates) as well as weaker economic data from around the world and from Germany and China in particular. Interestingly Chinese officials' data showed manufacturing contracting for the 5th month in a row but then the privately published Caixin Purchasing Manager’s Index surprised quite considerably on the upside.

The Eurozone PMI also contracted in the private sector, putting a potential rate hike from the European Central Bank in doubt although inflation expectations remain elevated. German industrial orders were again sharp. The US Federal Reserves ‘Beige Book’ survey also pointed to a slow down even as the US service sector activity reached its highest level in six months in August, driven by a surge in new orders and recruitment. The Institute for Supply Management (ISM) reported that the ISM services index rose nearly 2 points to 54.5, exceeding expectations. This upswing signifies sustained consumer demand and economic strength, particularly in industries like real estate, rental and leasing, and accommodation and food services.  The Reserve Bank of Australia kept interest rates steady but remained alert to the potential for sticky services inflation and the potential for another rate rise.

Overall, though economic data was generally weaker than expected, especially outside of the US. This implies less hawkish stances by central banks compared to the US Federal Reserve, leading to increased expectations of relatively high interest rates in the U.S. This boosted the U.S. dollar and weighed on currencies such as the Australian dollar, New Zealand dollar, Canadian dollar, euro, and pound sterling.

Crude oil, one of the more volatile commodity assets, remained resilient. Supply-related news, including Saudi Arabia and Russia's extension of the 1.3 million barrel per day cut, supported the major crude oil benchmarks.

That mixed picture left most markets slightly down a percent or so with Japan and the UK looking more resilient. Within the US market some of the largest tech stocks led the market down. Apple was down sharply on news that the Chinese government had banned the use of iPhones by its employees while Nvidia and some other AI related chip stocks gave back some of their gains form earlier in the year (Nvidia remains up 200% so far this year and is still the 4th largest stock in the US market).

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