U.S. shares closed last week with small gains after one of the most volatile time periods seen in years. Friday’s trading was far less volatile when compared to the rest of the week, however still maintained the jittery nature of previous sessions. Trading volume was high for the time of year but still significantly lower than the rest of the week. The Dow Jones Industrial Average fell 11.76 points, or 0.1%, to trade at 16643.01. The S&P 500 Index added 1.21 points, or 0.1%, to trade at 1988.87. The Nasdaq Composite gained 15.62 points, or 0.3%, to close the week at 4828.32. Various assets, including stocks, commodities and currencies, have tumbled as a worse-than-expected slowdown in China created fears that the second-largest economy in the world is facing limited growth. The concerns heightened as China devalued its currency and more economic data releases revealed China’s soft manufacturing. Some analysts point towards the upcoming interest rate hike as the real concern behind the recent round of corrections. U.S. interest rates have been low for a number of years, directly translating into more available funds for investment. Under this assumption, the upcoming rate hike, albeit small according to some Fed statements, would lessen the stock market’s ability to grow.
European shares inched higher on Friday. The STOXX 600 added 0.3% to close the day at 363.28, putting the index 0.6% higher for the week. The index extended its 3.5% jump on Thursday as it was boosted by upbeat U.S. GDP data. The German DAX 30, however, declined 0.2% to trade at 10,298.53. Despite Friday’s decline, the DAX is up 1.7% for the week. The French CAC 40 added 0.4% to close the day at 4,675.13 as it finished nearly 1% higher for the entire week. The FTSE 100 gained 0.9% to trade at 6,247.94 as it reduced its monthly losses to below 7%. European shares are likely to open soft this week as most analysts expect a 1-1.5% decline.
Commodities also recovered on Friday as crude oil surged 6.2% to trade at $45.22 per barrel. Crude oil has since declined 1.39% and is currently trading at $44.59. In terms of fundamentals, there are some indications of a return to a bearish market as the number of active U.S. oil rigs rose for six straight weeks. Additionally, the deal with Iran that would see the country reenter the oil market is only three votes short of being exempt of a congress veto, making the deal more likely to be approved. Gold added 1% on Friday to trade at $1,133.1 per ounce. However, the notion of an upcoming U.S. interest rate hike weakened it as the dollar strengthened, making gold more expensive for non-dollar investment. Looking forward, factory data from China, the European Central Bank’s policy meeting as well as the upcoming U.S. nonfarm payroll data will likely play a major roll in currencies and commodities.
Eurozone inflation data will be released today with the consumer price index (CPI), followed by Chinese PMI data. PMI, or the Purchasing Managers’ Index, is an indicator of the manufacturing sector, putting it in focus after the financial turmoil set off by Chinese shares.