Markets In-Review – Market Volatility Soothed To Quieter Tone

? Markets regain stability on China monetary easing

? S&P500 increases close to 1% during week

? Sovereign bond prices decrease as flight-to-safety dissolves

? Oil prices surge by most on 4.5 years

Markets opened last week with the volatility to which we’ve been accustomed recently. They have, however, later regained stability; The S&P500 (SPY) kicked off the week with a 5.24% drop between Monday and Tuesday. This was followed by a 3.9% Wednesday surge, a milder 2.43% increase on Thursday, and, lastly a serene 0.06% upward nudge on Friday. This concludes to the U.S. index adding close to 1% during the week. In retrospective, tranquility, however, came at a hefty cost this round, as the index is still over 5% lower than it were at the start of August, and lower even than it were at the start of 2015.

As China was regarded as a key generator of the decreases in the markets, this time, too its capital markets can be considered to have led global developments. Though the Hang Send did lose close to 3.6% during the week, nearly all of it was a negative Monday start. Monetary easing by Beijin helped lead the Chinese index to very little change, through the rest of the week.

Some upward pressure on yields in the U.S. bond market was evident amid speculation that China’s move to counter the Yuan’s devaluation required it to sell some of its holding of U.S. treasuries, thus decreasing their prices. Gaining from the stabilization in U.S. stock markets, the sovereign bond market’s pricing of a Fed rate hike on September 17th decision increased to approx. 40%, after falling below 30%. Additionally, breaking the flight-to-safety cycle, global bond yields saw significant gains. The yield of the U.S. 10 year government bond added no less than 0.15% during the week. The German 10 year went from around 0.55% on Monday, only to conclude the week at over 0.74%.

The universe aligns to push oil prices higher

Oil prices experienced quite a rollercoaster ride this week. Much like the rest of the markets, oil too opened the week on a negative note. Tumbling down to 37.75 per bbl, on Monday, marked yet another 6.5 year low for the black gold. Things, however, turned rather quickly to the upside from there. Among the factors pushing oil prices upwards this week we have news of an outage in two pipelines in Nigeria. These were augmented by Thursday reporting by the Wall Street Journal that Venezuela has been pushing OPEC members to convene with Russia in order to form a strategy “to stop the current oil price rout”. Moreover, on Friday oil prices surpassed USD 45, on news that Saudi Arabian troops have advanced into northern Yemen. With an 11.8% gain, the weekly increase in oil prices is the largest in the last 4.5 years.