Chinese investors, who return to trading after a four-day break, may be the key to sentiment this week and whether global equities will remain volatile.
China’s stock markets were closed last Thursday and Friday for ceremonies to mark the end of World War II. Ahead of the resumption of trade, People’s Bank of China Governor Zhou Xiaochuan said the rout in local stocks was near an end.
At least, Zhou hopes that is the case. Chinese authorities have been working hard to steady local markets. Shanghai’s benchmark index has shed 39 percent since June, with losses accelerating after an unexpected devaluation of the yuan in August.
Concerns about Chinese stocks and the slowing pace of growth in the world’s second-largest economy has put investors elsewhere on the defensive too.
Uncertainty about the timing of an interest rate rise in the US also has kept investors on edge and the release on last Friday on the latest reading on the US labour market provided little clarity of what lies ahead.
In August, US payrolls increased by 173,000 and the jobless rate fell to 5.1 percent from 5.3 per cent. Economists polled by Bloomberg had forecast 217,000 new jobs. On a more positive note, in terms of inflation, average hourly earnings were 0.3 percent higher, slightly better than expected.
Wall Street interpreted the data as more evidence the Federal Reserve is close to lifting rates, seen as a negative for corporate profits. On Friday, all 10 industry groups in the Standard & Poor’s 500 Index fell.
Overall on Friday, the Standard & Poor’s 500 Index slid 1.5 percent. The Dow Jones Industrial Average shed 1.7 percent and the Nasdaq Composite closed 1.1 percent lower. Wall Street will be closed today for the Labor Day holiday.
September is historically the worst month of the year for the S&P 500, with the equity gauge falling 1.1 percent on average based on data going back to 1927, according to data compiled by Bloomberg.
For the week, the Dow dropped 3.3 percent, the S&P 500 slid 3.4 percent, while the Nasdaq fell 3 percent.
In Europe, the Stoxx 600 Index retreated 2.5 percent last week.
“Markets are very nervous about the prospects for the world economy and what a Fed rate hike will mean in this context,” William Hobbs, head of investment strategy at Barclays Plc’s wealth-management unit in London, told Bloomberg. “Will the US help paper over some of the cracks we’re getting from emerging markets?”
In terms of US data, this week offers reports on the NFIB small business optimism index, and consumer credit, due Tuesday; import and export prices, and wholesale trade, due Thursday; the producer price index, and consumer sentiment, due Friday.
On the corporate front, on Wednesday Apple is expected to unveil its latest smartphone, that’s expected to feature an upgraded camera and processor.
In the euro-zone, investors will eye German industrial production, and euro-zone Sentix investors confidence, due today; Germany’s trade balance, and euro-zone gross domestic product, due Tuesday; and Germany consumer price index, due Friday.
On Thursday, Bank of England policy makers are forecast to keep the benchmark UK interest rate at a record-low 0.5 percent.