Weekly Market Outlook

Five Things You Need to Know to Start Your Day

There’s a slew of European data this morning, banker bonuses get hit hard, and August was a bad month for U.S. Treasuries. Here are some of the things people in markets are talking about today.

Euro-area inflation, unemployment

Inflation in the euro-area was stable at 0.2 percent in August from a year earlier, below analyst estimates for an increase to 0.3 percent. The European Central Bank, which is due to make its next monetary policy decision on Sept. 8, says its current financial stimulus is justified but other actors must play their part. Unemployment in the common-currency area remained unchanged at 10.1 percent, with falls reported in Germany for August and an unexpected drop in Italy in July. In the the U.K., the Nationwide Building Society said house prices rose at their fastest pace in five months in August as short supply outweighed weaker demand.

Bonuses hit

The rout in financial stocks this year has wiped more than $2.5 billion from the value of deferred share bonuses for investment bankers at Europe’s biggest financial firms, data compiled by Bloomberg show. Deutsche Bank AG Chief Executive Officer John Cryan, responding to market rumours that the bank had considered a merger with rival Commerzbank AG, said that he is looking to shrink and simplify the bank. Shares in Deutsche Bank have lost about 42 percent in market value this year.

Spanish vote, judgment day in Brazil

Spain, without a government since last December, sees a vote in parliament today in which caretaker Prime Minister Mariano Rajoy will try to win support to form a government. He currently has 170 of the 350-seat legislature backing him, but needs a majority to form a stable government. If he fails today, a plurality of votes on Friday will allow him to continue. But without an overall majority, Spain may face a third election in a year. Meanwhile, in Brazil, the final impeachment vote of former president Dilma Rousseff is scheduled for midday local time, with senators expected to vote in favor of her removal.

Markets mixed

Overnight, the MSCI Asia Pacific Index climbed 0.1 percent, to bring its gain for August to 1.2 percent. Japan’s Topix index added 1.3 percent to wipe out losses for the month. In Europe, the Stoxx 600 Index was 0.2 percent higher at 6:11 a.m. ET, with banks leading the gains. S&P 500 futures were flat.

Treasuries extend drop

U.S. Treasuries, already heading for their worst month since June 2015 are extending their drop this morning. The yield on the benchmark 10-year rose to 1.58 percent by 6:15 a.m. ET. With market implied odds of an interest rate hike at the September meeting at 34 percent, all eyes will be on Friday’s payrolls data to get a better view of likely action by the Federal Reserve.