📈 Weekly Market Update | Week Ending 08 Sep 2023

• 🇺🇸 The US services sector rises the most in six months

• 🇨🇳 Consumer prices in China rose in August

• 🇯🇵 Japan’s services PMI at a three-month high, but GDP gets revised lower

1. The US services sector rises the most in six months

US equities ended the week in the red, driven by news that China restricted the use of Apple’s iPhone by government employees. Resilient economic data (Services PMI, Initial Jobless Claims) and higher 10-year US treasury yields also contributed to the pullback in equities. The ISM services PMI unexpectedly jumped to 54.5 in August 2023, the strongest growth in the services sector in six months, compared to 52.7 in July 2023 and forecasts of 52.5. Additionally, US initial jobless claims fell to a near 7-month low, with the number of Americans filling for unemployment benefits coming in at 216,000, well below market expectations of 234,000, marking the lowest level since February 2023. Continuing claims also fell to their lowest levels since mid-July 2023 and sharply below market expectations. In response, the yield on the US 10-Year Treasury rose to 4.3% as traders bet that the US Fed will continue to keep interest rates higher for a more extended period as the US economy continues to show signs of resilience. For the week, the Dow Jones, S&P 500 and Nasdaq are down -0.75%, -1.29% and -1.93% respectively.

Over on the corporate front, shares of Apple fell by more than 3.5% on Thursday (7 September 2023) following reports that China issued a ban on the use of iPhones and other foreign-branded devices in several agencies and state-owned companies. China is Apple’s largest foreign product market, representing approximately a fifth of the company’s total revenue last year.

2. Consumer prices in China rose in August

Meanwhile, in China, after an initial drop of 0.3% a month earlier, consumer prices rose 0.1% year-on-year in August but came in below forecasts of a 0.2% gain. Core consumer prices, excluding food and energy, went up 0.8% year-on-year, the same pace as in July and remained the fastest in January. On a monthly basis, consumer prices gained 0.3% in August, in line with consensus. Producer prices, on the other hand, dropped 3.0% year-on-year in August 2023, which aligns with market consensus. This is the eleventh consecutive month of producer deflation but the smallest since March amid various policy measures from the Chinese Government to boost consumption and strengthen the post-pandemic recovery.

3. Japan’s services PMI is at a three-month high, but GDP gets revised lower

Lastly, Japan’s services PMI hit a three-month high, with the au Jibun Bank Japan Services PMI coming in at 54.3 in August, unchanged from preliminary numbers and after a 53.8 reading in July. This is the 12th consecutive month of growth in the service sector and the fastest pace since May 2023, lifted by a sharper rise in new orders, with new business from abroad also increasing. Japan’s composite PMI also reached a three-month high, with a reading of 52.6 for August 2023 and recording eight straight months of expansion in the private sector. Despite upbeat PMIs, Japanese shares pulled back as Japan’s second-quarter GDP growth was revised lower to 4.8% on an annualised basis, downgraded from a 6% growth seen in initial figures and lower than market expectations of a 5.5% expansion. The Japanese Yen also continues to depreciate, reaching the 147 level against the US Dollar and hovering close to its lowest level in nearly ten months as the US Dollar continues to strengthen despite expectations that the US Fed is likely done hiking rates this year.

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This Weekly Market Update is sourced from Bloomberg and various financial news.

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