U.S. Review
Q3 Kicks It into High Gear
• The factory sector has accelerated, with the ISM manufacturing index surging in August, factory orders showing strength beyond aircraft in July and power & manufacturing leading nonresidential construction spending.
• August’s ISM nonmanufacturing index jumped to its highest level in nine years, while the trade deficit narrowed in July, pointing to more broad-based growth in the economy.
• Nonfarm payrolls grew by a somewhat disappointing 142,000 in August, although all signs point to this being an anomaly. The unemployment rate ticked down to 6.1 percent.
ECB Cuts Rates Further and Starts to Buy ABS
• The European Central Bank this week cut three policy rates further in an effort to guide short-term interest rates even lower. The ECB also announced that it was embarking on a program to buy asset-backed securities, and indicated it is prepared to ease policy even further.
• The ECB’s actions were taken against a backdrop of weak economic growth and essentially no inflation. We expect that growth will remain sluggish and that inflation will remain non-existent for the foreseeable future. Therefore, we look for the ECB to begin a QE program centered on sovereign bonds at some point over the next few months.
Read the full report: Market Research