Markets began the week on an upbeat note as the probability of a war between the U.S. and North Korea receded. Equity markets climbed, volatility declined, and the safe haven rally lost momentum. However, by mid-week, the risk-off sentiment was back on track after backlash for U.S. President Donald Trump’s handling of the tragic events in Charlottesville, Virginia, and the gruesome terror strike in Barcelona. On the economic data front, the week kicked off with China reporting its July retail sales and industrial production figures.
Both industrial output and retail sales were lower than expected, reinforcing concerns about the pace of economic growth in the country during the second half of 2017. The pound fell against the U.S. dollar after U.K. consumer price inflation remained unchanged at 2.60% in July, reducing the prospect of an early interest rate hike. Gold briefly broke above the key level of $1300 an ounce after minutes from the U.S. Federal Reserve’s July 25-26 meet showed that policymakers were increasingly wary about the recent weakness in inflation, and favoured halting the cycle of rate hikes until the consumer price trend becomes clearer.