Market Update

The tension between the US and Iran turned out to be just a lot of noise! The week started on a grim note as global equity markets plummeted due to escalating Middle East tensions over the weekend. Fortunately, the storm clouds quickly dispersed, revealing that the rhetoric had been more intense than the actual actions taken. Iran's retaliation, while domestically satisfying, was unprovocative and resulted in no casualties, preventing the need for a US response.
Surprisingly, by the end of the week, it seemed as though nothing significant had occurred. Most major global equity markets rebounded to their pre-Iran crisis levels, and the price of Brent crude oil retreated from nearly $70 to $65 per barrel.
This episode underscores the adage that sometimes, fear is the only thing to fear. Despite sensational news headlines suggesting an imminent all-out war in the Middle East and a potential oil shock leading to a global recession, there were compelling reasons to stay calm from a macroeconomic perspective. Key among these is the commitment of major central banks worldwide to maintain low-interest rates, making any market weaknesses appear as opportunities to buy rather than causes for panic.
In terms of data releases this week, there was a mix of reports. The US non-manufacturing ISM on Tuesday (January 7, 2020) exceeded expectations, reaching 55.0, the highest since August 2019. However, today's (January 10, 2020) US non-farm payrolls slightly disappointed, with 145,000 new jobs, accompanied by minor downward revisions for November and October. The unemployment rate remained at 3.5%, but average wage growth dipped below 3% for the first time since July 2018, slowing to 2.9%.
Looking ahead, the upcoming week promises a busier economic calendar. Key releases include US and UK Consumer Price Index (CPI), Producer Price Index (PPI), and retail sales data. Additionally, there will be the Fed Beige Book and US housing data. In other regions, Eurozone industrial production and CPI figures will be released, along with China's Q4 GDP report.
Furthermore, on Wednesday, January 15, 2020, Chinese Vice Premier Liu He is set to join President Donald Trump at the White House to sign the first phase of the US/China trade deal.