US equity markets closed out a very strong month of August with a mixed performance. August has seen the Nasdaq and S&P both blown through historically record highs, while the Dow is fast approaching pre-pandemic levels. A slew of data from Japan confirmed the impact of the pandemic on the economy, with Industrial Production contracting 16.1%, while Retail Sales fell 2.8%. Japanese Housing Starts contracted 11.4%, but Consumer Confidence jumped up 9.7%, after their successful PM Abe resigned due to health reasons.
The safe haven US Dollar continues to suffer the recovering markets, as the EUR jumped to 1.1940, while the GBP traded up to 1.3370. Confidence is flooding back into markets, while the virus appears to be under control. The RBA will leave rates unchanged today, but the rhetoric is likely to reveal the dire state of the economy, suffering lockdowns and border closures. The AUD has been the beneficiary of the softer reserve, looking to regain 0.7400, while the NZD traded 0.6730. New Zealand Business confidence, unsurprisingly collapsed once again, contracting to 41.8! These are disturbing numbers but the return of the virus has damaged sentiment.
September is upon us and should welcome further economic gains as global economies continue to reopen and the virus is conquered. Mortality rates have plunged as treatments become more effective and the possibility of a vaccine becomes more likely. US/China relations will remain the biggest global vulnerability.