Concerns over the global slowdown determined markets this week. The Chinese economy remained in focus. Today's Chinese preliminary Markit/Caixin manufacturing Purchasing Managers' Index (PMI) added to worries over the economy in China. The index decreased to 47.1 in August from 47.8 in July, missing expectations for a decline to 47.7, and hitting a 77-month low. The Chinese government will face a big challenge to boost the economy.
The first interest rate hike was more in focus this week. Market participants still speculate on that the Fed starts raising its interest rate in September. But the Fed's decision seems to be more uncertain. Reasons are the U.S. economic data and this week's yuan devaluation. China's central bank reassured market participants on Thursday, saying there was no basis for further yuan devaluation.
The Greek debt crisis and the first interest rate hike remain in focus, whereby the Greek debt crisis receded a little into the background. But I think the negotiations on the third Greek bailout programme will be difficult. The European Commission hopes to reach a deal by August 20 as Athens will have to repay €3.4 billion loans to the European Central Bank on August 20.
Greece's lenders agreed to provide the third bailout programme to Greece. The bailout programme should total about €90 billion. European Union finance ministers agreed to provide a €7 billion bridge loan to Greece until the third Greek bailout programme will be set up, and the amount of emergency funding (ELA) to Greek banks was increased by €900 million for one week
This weekend should be very important for markets. Greece presented new reform proposals on Thursday. The Eurogroup will make a decision on these proposals on Saturday, before the officials of all EU countries will meet on Sunday.
There is still no end of the Greek drama. Greeks will vote on Sunday if the Greek government should accept the proposals made by its lenders. Greek Prime Minister Alexis Tsipras said that Greek should vote "No" on Sunday to get better proposals. He also said that the vote "No" would not mean that Greece have to leave the Eurozone.
The Greek drama continues. There were several rounds of debt talks between Athens and its lenders, but there is still no deal. The procedure is the same: the Greek provides a proposal. First comments by EU officials are optimistic. But they say that they need time to check a proposal closely. Later they say that a proposal is not enough.
The Fed's monetary policy and the debt talks between Greece and its creditors were the main events this week. Investors hoped for signals when the Fed starts raising its interest rate. They were disappointed as the Fed Chair mentioned that the interest rate may be hiked twice this year, but she added that the hiking of the interest rate will be gradual. The timing was not mentioned.
There is still no progress in the debt talks between Greece and its creditors, and the likelihood for a Greek default rises. The Greek government provided a new proposal this week, but its creditors said that the proposal is insufficient. The culmination of the debt talks was yesterday as the International Monetary Fund (IMF) technical team has left the debt talks in Brussels, saying there were "major differences".
This week is not over now, but it has been a turbulent week. Market participants were concentrated on the U.S. economic data and the Greek debt crisis. The U.S. labour market data is scheduled to be released today. Analysts expect that U.S. unemployment rate is expected to remain unchanged at 5.4% in May. The U.S. economy is expected to add 227,000 jobs in May, after adding 223,000 jobs in April.
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