GLOBAL CAPITAL MARKETS OVERVIEW:  

U.S. stocks fell sharply on Friday, weighed by the prospect of sharp monetary tightening by the Federal Reserve and the burden it could place on the world's largest economy. St. Louis Federal Reserve Bank President Bullard said he is leaning toward a third straight 75 basis point rate hike in the Fed's next decision because there is no guarantee that inflation has peaked. However, other policymakers also said a dovish turn was unlikely, with the latest Federal Open Market Committee minutes showing the Fed will keep raising interest rates until inflation cools sharply. The Dow fell nearly 300 points, while the S&P 500 and Nasdaq lost 1.1% and 2%, respectively. Technology and high-growth stocks were the day's main losers, tracking a decline in U.S. debt. Equities also saw additional volatility as $2 trillion in options contracts are expected to expire on the trading day. For the week, the S&P 500 and Nasdaq lost 1.1% and 2.5%, respectively, with the Dow recording marginal losses. The S&P/TSX Composite fell 0.8 percent to close at 20,110 on Friday, tracking a slump in North American stocks amid long-standing fears that central banks will tighten monetary policy aggressively. Prior retail sales fell by the most in more than a year, fueling risk aversion amid high borrowing costs. Tech stocks led the declines, with losses averaging more than 3%, with Shopify down nearly 7%. The demand crisis has also prompted deep losses for oil service providers and mining companies, tracking a drop in gold prices and a weekly decline in crude oil prices. Finally, the healthcare sector extended yesterday's losses, with cannabis growers falling further, with Aurora Cannabis and Tilray down 7%. Lastweek, the index posted a marginal loss. European shares ended mostly lower on Friday, with Germany's DAX and the benchmark Stoxx 600 down nearly 1 percent, as concerns continued over further interest rate hikes to curb the impact of high inflation on the growth momentum. Across sectors, real estate and consumer cyclical saw the biggest declines, followed by financials and health care gains. On the data front, German producer prices posted a record month-on-year increase in July as energy prices surged. Meanwhile, London stocks outperformed, closing in green after data showed retail sales unexpectedly rebounded in July, boosted by online shopping. The Stoxx 600 fell nearly 1% last week, weighed down by weak economic data that showed euro zone inflation hit a new record in July, with the region growing less than previously expected in the second quarter, exacerbating the current energy crisis Concerns that will have a major impact on the economy. On Friday, the FTSE MIB index fell 2% to close at 22,530, underperforming its European peers. Soaring energy prices and continued expectations of sharp interest rate hikes lowered growth expectations and weighed on Italy's fragile fiscal stability. Milan's heavyweight financials led to losses, tracking sharp losses in BTP instruments, with shares in Finecobank down nearly 5%, while UniCredit and Mediobanca each lost 3.8%. Also, Italian utilities closed lower, halting sharp gains in the sector after soaring gas prices in Europe, and several government measures to help citizens pay their energy bills boosted the sector's prospects. Earlier this month, the Italian government passed 17 billion euros to support households from higher energy costs, and the budget has increased by more than 35 billion euros since the start of the year. For the week, Milan's benchmark stock index fell 1.7%. The CAC 40 index fell 0.9 percent to close at 6,496 on Friday, offsetting a small gain in the previous session and was in line with its European peers as investors worried about soaring energy prices, tighter monetary policy, and slowing growth. German producer prices hit a record high in July, fueled by rising energy costs, adding to concerns about the economic outlook. In company headlines, Varnevar announced that it has begun submitting a rolling application to the U.S. Food and Drug Administration (FDA) seeking approval of the VLA single-dose VLA1553 chikungunya vaccine candidate for people 18 years of age and older. Among individual stocks, ArcelorMittal fell the most, down 4.9%, followed by Renault (-3.1%) and Unibail Rodamco We (-3.2%). The CAC 40 fell nearly 0.9% for the week, snapping a six-week winning streak. The ruble-based MOEX Russia index pared early losses to just over 2,195 points as investors focused on the energy market and its possible impact on Russia's economic outlook. Bank stocks led gains, closing the session up more than 2% on average, with TCS Group up 8%, still benefiting from the CBR's statement that Russia's banking sector does not require additional systemic capitalization. Meanwhile, stronger grain supplies supported Russian fertilizers, with Phosagro also benefiting from strong quarterly results. On the other hand, fears of a recession in Europe have weighed on demand from gas companies Gazprom and Novatek, which has eased amid a surge in TTF gas prices last week. Additionally, MTS stock fell nearly 1% after a quarterly report showing a 36% drop in net income. For the week, the Moscow Exchange's benchmark index rose 2.2 percent. New Zealand NZX 50 tumbled 129.53 points, or 1.1%, to settle at 11,684.81 on Friday, its lowest close since Aug. 2, extending losses from the previous session and tracking sharp losses in U.S. stock futures, following volatile market conditions, mixed earnings reports, muted signs of inflation and expectations the Federal Reserve will remain hawkish on interest rates. Locally, the Royal Bank of New Zealand announced further tightening earlier this week, saying New Zealand's inflation rate would return to the committee's target range by mid-2024. Heavy rain battered parts of New Zealand for the fourth day in a row today, forcing hundreds of people from their homes. The laggards were New Talisman Gold Mines (-33.3%), Green fern Industries (-6.7%), Vital Limited (-6.2%), and Fisher Pike Medical (-6.3%). For the week, the index fell 0.4%. China Shanghai Composite dropped 0.59% to close at 3,258, while the Shenzhen Composite dropped 1.27% to close at 12,359, with both benchmarks ending the week lower as investors weighed on China's economy. There are concerns over the instability, which is reflected in weak domestic data and sluggish credit demand. Nomura and Goldman Sachs on Thursday cut their forecasts for China's GDP, citing weak demand, Covid-19-related uncertainty, and power shortages. That poses a challenge to the People's Bank of China, which is under pressure to take more easing measures but has little wiggle room amid concerns about rising inflation and capital flight. The People's Bank of China is expected to cut benchmark rates on corporate loans and mortgages on Monday after unexpectedly slashing two key interest rates earlier last week. Growth-oriented new energy, technology, and healthcare stocks led losses, erasing most of their gains earlier in the week. Japan Nikkei 225 fell 0.04% to close at 28,930 on Friday, while the broader Topix index rose 0.2% to 1995 in mixed trade as investors focused on the market's reaction to Japan's domestic inflation data that challenged Japan The bank's firm commitment to keeping interest rates ultra-low. Headline inflation in Japan rose 2.6 percent year-on-year in July from 2.4 percent in June, accelerating at the fastest pace since April 2014. The core consumer price index rose 2.4% annually from 2.2% in June, the highest level since December 2014 and above the central bank's 2% target for the fourth consecutive month. Heavyweights were mixed on Friday, with Istyle Inc (11.7%), Tokyo Electron (1.5%), and Sony Group (2.1%) notable gains, while SoftBank Group (0.9%), Fast Retailing (1.1%) and Nintendo (1.1%) %) fell. The benchmark index ended the week higher, near its highest level since January. Australia S&P/ASX 200 edged up 0.02% to 7115 on Friday, near its highest level in 10 weeks, as energy and mining stocks gained on higher commodity prices. Meanwhile, investors remained cautious as several Fed officials said they would continue to raise interest rates to keep inflation in check. Energy stocks led gains as oil prices surged overnight, with industry leaders Woodside Energy and Santos Ltd gaining 4.2% and 6.4%, respectively. Heavyweight iron ore miners and gold stocks rose, such as BHP Billiton (1%) and Newcrest Mining (3.6%). Meanwhile, weak earnings reports weighed on some companies, including AGL Energy (-3.9%), TPG Telecom (-12.4%), and Inghams Group (-9.4%). As a result, the benchmark index rose 1.2% for the week, its fifth straight weekly gain.

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- CA: Preliminary estimates suggest that in July 2022, Canadian retail sales may decline by 2% month-on-month. In June, retail sales rose 1.1% from the previous month, well above the preliminary forecast for a 0.3% increase and recovering from an upwardly revised 2.3% increase in May. Sales rose in 8 of the 11 sub-sectors, as petrol station turnover rose for the sixth month (3.9%), although volumes were down from the previous period. Retail sales at auto and parts dealers also rose (2.8%), supported by new car dealers (2.9%), furniture stores (1.1%), and clothing and accessories stores (2.1%). As a result, retail trade rose 11% year-on-year in June, a slowdown from 14.4% in May.

- TW: In the second quarter of 2022, Taiwan's current account surplus narrowed to $26.55 billion from $29.53 billion a year earlier. The trade surplus in services fell to $2.39 billion from $3.73 billion a year ago, while the surplus in goods rose to $23.88 billion from $1.79 billion. Meanwhile, the primary revenue surplus fell from $5.66 billion to $3.84 billion, while the secondary revenue deficit narrowed to $570 million from $640 million.

- EU: The euro zone's current account surplus shrank sharply to 3.2 billion euros in June 2022 from 27.6 billion euros a year earlier, as the value of imports rose due to rising energy costs, and the goods surplus narrowed to 4.3 billion euros from 31.4 billion euros. Meanwhile, the services surplus widened to €16.4 billion from €9.9 billion; the primary revenue deficit fell to €3.0 billion from €3.2 billion, while the secondary revenue gap rose to €14.4 billion from €10.6 billion. Considering the second quarter, the euro area's current account gap was 20.1 billion euros, compared with a surplus of 1 billion euros in the first quarter.

- UK: UK public sector net borrowing (excluding public sector banks) was £4.9bn in July 2022, £0.8bn less than in July 2021 but £5.9bn more than before the coronavirus (COVID-19) outbreak in July 2019. It had a surplus of £900 million in July that year. In July 2022, central government revenue was £78.2bn, an increase of £6.1bn on 2021. Of this revenue, taxes rose by £4.6bn to £58.6bn. Central government recurring spending rose by £3.4bn to £76.5bn, mainly due to a £2.3bn increase in interest payable on its debt compared to 2021. At the end of July 2022, public sector net debt excluding public sector banks was £2,388.1 billion, or about 95.5% of GDP, an increase of £188.4 billion or 1.4% of GDP compared to 2021. 

- UK: Britain's GfK consumer confidence index fell to a record low of -44 in August 2022 from -41 in July, beating expectations for a fall to -42, as British households continue to grapple with soaring living costs. Joe Staton, director of the client strategy at GfK, said: "All indicators fell, reflecting serious concerns about the soaring cost of living. Anger over the UK economy was the biggest driver of these findings." UK inflation was 10% higher in July than a year ago, accelerating faster in 40 years. The Bank of England expects a further rise in prices to push the UK economy into recession later this year. "Finally reaching a deal has become a nightmare, with the crisis of confidence only intensifying as the fall gets gloomy and the winter gets chilly," Staten added.

- UK: In July 2022, UK retail sales unexpectedly rose 0.3% from the previous month, recovering from a decline over the past three months and beating consensus forecasts of 0.2%. Sales at non-store retail (mostly online) rebounded 4.8%, while grocery store sales rose 0.1%, as a series of promotions in July 2022 boosted purchases. On the other hand, sales at motor fuel and non-food stores fell (-0.9%) and (-0.7%), respectively. Sales were 2.3% above February 2020 levels before the pandemic but down from last year.

- GE: Annual German producer inflation rose to a record 37.2% in July 2022 from 32.7% a month earlier, beating market expectations of 32%. Energy prices remained the biggest gainers (105.0% vs. 86.1% in June), namely natural gas (163.8%) and electricity (125.4%). Excluding energy, producer prices rose 14.6% year on year. Prices of intermediate goods (19.1%), especially metals (24.1%), fertilizers and nitrogen compounds (100.4%), and cereal flour (48.9%), also saw substantial increases; non-durable consumer goods (16.2%) such as food (21.1%) %); consumer durables (up 10.9%), and capital goods (8%), the biggest gain since September 1975. Monthly producer prices rose 5.3% to an all-time high after printing in June and a consensus increase of 0.6%.

- JP: Annual inflation in Japan rose to 2.6% in July 2022 from 2.4% in June. It was the 11th straight month of increases in consumer prices and the fastest pace since April 2014, when fuel and food costs soared after Russia invaded Ukraine and the yen weakened sharply. The main upward pressure comes from food costs (4.4% vs. 3.7% in June), fuel, lighting and water (14.7% vs. 14.0%), clothing (1.4% vs. 1.1%), housing (0.6% vs. 0.6%) , furniture (3.9% vs. 3.6%), education (0.7% vs. 0.7%), culture and entertainment (0.8% vs. 1.2%) and miscellaneous (1.2% vs. 1.2%). On the other hand, transportation costs (-0.2% vs -0.7%) and medical costs (-0-8% vs -1.7%) continued to decline. Core consumer prices rose 2.4% year-on-year, the highest since December 2014, after rising 2.2% in June, in line with forecasts and above the Bank of Japan's 2% target for the fourth straight month. On a monthly basis, consumer prices rose 0.5%, the highest level since January 2021, after being flat in June.

LOOKING AHEAD:   

Today, investors will receive the following:

- EUR: German Buba Monthly Report.

- CAD: NHPI m/m

KEY EQUITY & BOND MARKET DRIVERS:

- IT: Italy's 10-year government bond yield rose to 3.5 percent in August, its highest level in nearly a month, on bets that central banks will continue to prioritize fighting inflation and aggressively tighten monetary policy. ECB board member Isabel Schnabel said the inflation outlook in the eurozone had not improved since the central bank's last meeting, raising the risk of a sharp rate hike. In July, the European Central Bank raised more interest rates by 50 basis points than expected. Political uncertainty ahead of the Italian election also added pressure on Italy's debt. Polls back a three-party right-wing coalition, suggesting the brother of Italian leader Giorgio Meloni will be the next prime minister. Any changes to the ongoing reforms could lead to more than 200 billion euros in recovery funding. The spread between 10-year British and German bunds widened sharply to more than 230 basis points, signaling increased perceptions of Italian debt risk.

- GE: German 10-year bond yields topped 1.2 percent in August, the highest level in nearly a month, as concerns over inflation reinforced expectations that major central banks will continue to tighten policy aggressively. ECB board member Isabel Schnabel said the ECB's inflation outlook has not improved since raising interest rates by 50 basis points in July. The latest CPI data confirmed that inflation in the eurozone hit a record 8.9% in July. Meanwhile, Europe's energy crisis continues due to dwindling supplies from Russia, with soaring gas prices further threatening the economic outlook and inflation. Germany's Federal Network Agency said the country needs to cut its natural gas use by 20 percent to avoid winter rationing. In addition, the latest data showed that investor confidence in the German economy fell in August to its lowest level since October 2008 as high heating and energy costs weighed on the outlook.

- CA: Canada's 10-year government bond yield rose above 2.9 percent, its highest level in four weeks, as investors continued to assess the Bank of Canada's guidance after releasing new consumer price data. While headline inflation eased in July from a 39-year high in the previous month, the central bank's core consumer price index continued its accelerating trend. Rising costs net of energy costs has fueled speculation that the central bank is inclined to maintain its hawkish stance. At its last meeting, the Bank of China surprised markets by raising its benchmark interest rate by 100 basis points in July while signaling further tightening to rein in inflation well above its 2 percent target.

- US: U.S. stock futures fell 1% on Friday as investors worried that prolonged monetary tightening by the Federal Reserve could drag the world's largest economy into recession. Despite some signs that inflation may peak, the U.S. central bank has confirmed that a solid turnaround is unlikely until inflation returns to its 2% target. St. Louis Fed President James Bullard, Minneapolis Federal Reserve Neel Kashkari, and San Francisco Fed President Mary Daly are the latest policymakers to echo this sentiment. The major indexes were mixed last week, with the Dow and S&P 500 remaining in positive territory, while the tech-heavy Nasdaq Composite was on track to end a four-week rally.

STOCK MARKET SECTORS:

- High: Health Care, Energy.

- Low: Consumer Discretionary, Communication Services, Financials, Information Technology.

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- EUR: The euro weakened to below $1.01, near the key $1 parity level, as investors balanced the ECB's policy tightening path with the region's economic outlook. The European Central Bank is expected to raise interest rates by 50 basis points in September, following a similar move in July to rein in soaring inflation, but the outlook for the region is worrying due to an energy crisis sparked by dwindling supplies in Russia. Electricity prices in Europe recovered to record levels in August amid concerns that economies, particularly Germany, would not be able to secure winter power reserves. The latest data showed that the euro zone economy grew 0.6% in the second quarter, down from a preliminary estimate of 0.7%, and investor confidence in the German economy fell in August to its lowest level since October 2008. Elsewhere, the dollar was again near 20-year highs, fueled by hawkish comments from Fed officials.

- GBP: Sterling fell to $1.18, near its lowest level since March 2020, on growing fears that a spike in domestic inflation would mean higher interest rates and a weakening UK economy. UK inflation rose to a 40-year high of 10.1% in July, adding to speculation that the Bank of England will raise borrowing costs by another 50 basis points in September. In addition, retail sales unexpectedly rebounded in July, and the latest jobs report showed the labor market remained tight but began to cool. As a result, financial markets see a 96% chance that the Bank of England will raise its main interest rate by 0.5 percentage points to 2.25% at its next meeting on September 15, which would be the seventh hike in a row and push borrowing costs to 2.25%. The highest level since 2008. In August, the central bank raised interest rates by 50 basis points for the first time since 1995 and expected inflation to peak at 11.1% in October, and the country will enter a recession in the fourth quarter that will last for five quarters.

- CNY: The offshore yuan weakened by more than 6.8 against the dollar, near its lowest level in 23 months, as a shaky economy is forcing China's central bank to ease more, while the Federal Reserve says it will keep raising interest rates to catch up before inflation. The People's Bank of China is expected to cut the country's benchmark lending rate for corporate loans and mortgages on Monday, following a surprise cut to two key interest rates earlier last week, to boost demand and counter signs of an economic slowdown. Goldman Sachs and Nomura on Thursday cut their GDP forecasts for China, citing weak demand, Covid-19-related uncertainty, and power shortages. However, analysts have warned that the central bank has little leeway amid persistent inflationary pressures, rising global interest rates, and the risk of rising capital outflows.

- JPY: The yen weakened by more than 136 yen against the dollar, falling to its lowest level in three weeks, as rising domestic inflation failed to support the yen amid a widening divergence in monetary policy. Headline inflation in Japan rose 2.6 percent year-on-year in July from 2.4 percent in June, accelerating at the fastest pace since April 2014. In addition, the core consumer price index rose 2.4% annually from 2.2% in June, the highest level since December 2014 and above the central bank's 2% target for the fourth consecutive month. The yen came under pressure last week as the Bank of Japan is expected to keep interest rates ultra-low, despite the Federal Reserve's pledge to adopt a tougher policy to fight inflation. The yen also suffered outflows as investors opted for the safety of the dollar after disappointing Chinese and U.S. data rekindled fears of a global recession.

- USD: The dollar index hovered at a one-month high above 107.5 on Friday, up about 2 percent last week, buoyed by hawkish rhetoric from Fed officials who said they would continue to raise interest rates to slash inflation. In the latest central bank comments, St. Louis Fed President James Bullard said he was considering backing a third straight 75 basis point rate hike in September and said he was not ready to say the economy had already experienced a spike in inflation during the worst period. San Francisco Fed President Mary Daly also stressed the need to push rates into the cap, while Kansas City Fed President Esther George said she and her colleagues were "completely convinced" Tightening will not stop until inflation falls. Traders will get more insight from Federal Reserve Chairman Jerome Powell at next week's Jackson Hole annual symposium

CHART OF THE DAY:

On Friday, the ruble-based MOEX Russia index pared early losses to just over 2,195 points as investors focused on the energy market and its possible impact on Russia's economic outlook. Bank stocks led gains, closing the session up more than 2% on average, with TCS Group up 8%, still benefiting from the CBR's statement that Russia's banking sector does not require additional systemic capitalization. Meanwhile, stronger grain supplies supported Russian fertilizers, with Phosagro also benefiting from strong quarterly results. On the other hand, fears of a recession in Europe have weighed on demand from gas companies Gazprom and Novatek, which has eased amid a surge in TTF gas prices last week. Additionally, MTS stock fell nearly 1% after a quarterly report showing a 36% drop in net income. For the week, the Moscow Exchange's benchmark index rose 2.2 percent.

- Ruble-based MOEX Russia index - D1, Resistance (target zone) around ~ 2494, Support around  ~ 1734

GLOBAL CAPITAL MARKETS OVERVIEW:   U.S. stocks fell sharply on Friday, weighed by the prospect of sharp monetary tightening by the Federal Reserve and the burden it could place on the world's largest economy. St. Louis Federal Reserve Bank President Bullard said he is leaning toward a third straight 75 basis point rate hike in the Fed's next decision because there is no guarantee that inflation has peaked. However, other policymakers also said a dovish turn was unlikely, with the latest Federal Open Market Committee minutes showing the Fed will keep raising interest rates until inflation cools sharply. The Dow fell nearly 300 points, while the S&P 500 and Nasdaq lost 1.1% and 2%, respectively. Technology and high-growth stocks were the day's main losers, tracking a decline in U.S. debt. Equities also saw additional volatility as $2 trillion in options contracts are expected to expire on the trading day. For the week, the S&P 500 and Nasdaq lost 1.1% and 2.5%, respectively, with the Dow recording marginal losses. The S&P/TSX Composite fell 0.8 percent to close at 20,110 on Friday, tracking a slump in North American stocks amid long-standing fears that central banks will tighten monetary policy aggressively. Prior retail sales fell by the most in more than a year, fueling risk aversion amid high borrowing costs. Tech stocks led the declines, with losses averaging more than 3%, with Shopify down nearly 7%. The demand crisis has also prompted deep losses for oil service providers and mining companies, tracking a drop in gold prices and a weekly decline in crude oil prices. Finally, the healthcare sector extended yesterday's losses, with cannabis growers falling further, with Aurora Cannabis and Tilray down 7%. Lastweek, the index posted a marginal loss. European shares ended mostly lower on Friday, with Germany's DAX and the benchmark Stoxx 600 down nearly 1 percent, as concerns continued over further interest rate hikes to curb the impact of high inflation on the growth momentum. Across sectors, real estate and consumer cyclical saw the biggest declines, followed by financials and health care gains. On the data front, German producer prices posted a record month-on-year increase in July as energy prices surged. Meanwhile, London stocks outperformed, closing in green after data showed retail sales unexpectedly rebounded in July, boosted by online shopping. The Stoxx 600 fell nearly 1% last week, weighed down by weak economic data that showed euro zone inflation hit a new record in July, with the region growing less than previously expected in the second quarter, exacerbating the current energy crisis Concerns that will have a major impact on the economy. On Friday, the FTSE MIB index fell 2% to close at 22,530, underperforming its European peers. Soaring energy prices and continued expectations of sharp interest rate hikes lowered growth expectations and weighed on Italy's fragile fiscal stability. Milan's heavyweight financials led to losses, tracking sharp losses in BTP instruments, with shares in Finecobank down nearly 5%, while UniCredit and Mediobanca each lost 3.8%. Also, Italian utilities closed lower, halting sharp gains in the sector after soaring gas prices in Europe, and several government measures to help citizens pay their energy bills boosted the sector's prospects. Earlier this month, the Italian government passed 17 billion euros to support households from higher energy costs, and the budget has increased by more than 35 billion euros since the start of the year. For the week, Milan's benchmark stock index fell 1.7%. The CAC 40 index fell 0.9 percent to close at 6,496 on Friday, offsetting a small gain in the previous session and was in line with its European peers as investors worried about soaring energy prices, tighter monetary policy, and slowing growth. German producer prices hit a record high in July, fueled by rising energy costs, adding to concerns about the economic outlook. In company headlines, Varnevar announced that it has begun submitting a rolling application to the U.S. Food and Drug Administration (FDA) seeking approval of the VLA single-dose VLA1553 chikungunya vaccine candidate for people 18 years of age and older. Among individual stocks, ArcelorMittal fell the most, down 4.9%, followed by Renault (-3.1%) and Unibail Rodamco We (-3.2%). The CAC 40 fell nearly 0.9% for the week, snapping a six-week winning streak. The ruble-based MOEX Russia index pared early losses to just over 2,195 points as investors focused on the energy market and its possible impact on Russia's economic outlook. Bank stocks led gains, closing the session up more than 2% on average, with TCS Group up 8%, still benefiting from the CBR's statement that Russia's banking sector does not require additional systemic capitalization. Meanwhile, stronger grain supplies supported Russian fertilizers, with Phosagro also benefiting from strong quarterly results. On the other hand, fears of a recession in Europe have weighed on demand from gas companies Gazprom and Novatek, which has eased amid a surge in TTF gas prices last week. Additionally, MTS stock fell nearly 1% after a quarterly report showing a 36% drop in net income. For the week, the Moscow Exchange's benchmark index rose 2.2 percent. New Zealand NZX 50 tumbled 129.53 points, or 1.1%, to settle at 11,684.81 on Friday, its lowest close since Aug. 2, extending losses from the previous session and tracking sharp losses in U.S. stock futures, following volatile market conditions, mixed earnings reports, muted signs of inflation and expectations the Federal Reserve will remain hawkish on interest rates. Locally, the Royal Bank of New Zealand announced further tightening earlier this week, saying New Zealand's inflation rate would return to the committee's target range by mid-2024. Heavy rain battered parts of New Zealand for the fourth day in a row today, forcing hundreds of people from their homes. The laggards were New Talisman Gold Mines (-33.3%), Green fern Industries (-6.7%), Vital Limited (-6.2%), and Fisher Pike Medical (-6.3%). For the week, the index fell 0.4%. China Shanghai Composite dropped 0.59% to close at 3,258, while the Shenzhen Composite dropped 1.27% to close at 12,359, with both benchmarks ending the week lower as investors weighed on China's economy. There are concerns over the instability, which is reflected in weak domestic data and sluggish credit demand. Nomura and Goldman Sachs on Thursday cut their forecasts for China's GDP, citing weak demand, Covid-19-related uncertainty, and power shortages. That poses a challenge to the People's Bank of China, which is under pressure to take more easing measures but has little wiggle room amid concerns about rising inflation and capital flight. The People's Bank of China is expected to cut benchmark rates on corporate loans and mortgages on Monday after unexpectedly slashing two key interest rates earlier last week. Growth-oriented new energy, technology, and healthcare stocks led losses, erasing most of their gains earlier in the week. Japan Nikkei 225 fell 0.04% to close at 28,930 on Friday, while the broader Topix index rose 0.2% to 1995 in mixed trade as investors focused on the market's reaction to Japan's domestic inflation data that challenged Japan The bank's firm commitment to keeping interest rates ultra-low. Headline inflation in Japan rose 2.6 percent year-on-year in July from 2.4 percent in June, accelerating at the fastest pace since April 2014. The core consumer price index rose 2.4% annually from 2.2% in June, the highest level since December 2014 and above the central bank's 2% target for the fourth consecutive month. Heavyweights were mixed on Friday, with Istyle Inc (11.7%), Tokyo Electron (1.5%), and Sony Group (2.1%) notable gains, while SoftBank Group (0.9%), Fast Retailing (1.1%) and Nintendo (1.1%) %) fell. The benchmark index ended the week higher, near its highest level since January. Australia S&P/ASX 200 edged up 0.02% to 7115 on Friday, near its highest level in 10 weeks, as energy and mining stocks gained on higher commodity prices. Meanwhile, investors remained cautious as several Fed officials said they would continue to raise interest rates to keep inflation in check. Energy stocks led gains as oil prices surged overnight, with industry leaders Woodside Energy and Santos Ltd gaining 4.2% and 6.4%, respectively. Heavyweight iron ore miners and gold stocks rose, such as BHP Billiton (1%) and Newcrest Mining (3.6%). Meanwhile, weak earnings reports weighed on some companies, including AGL Energy (-3.9%), TPG Telecom (-12.4%), and Inghams Group (-9.4%). As a result, the benchmark index rose 1.2% for the week, its fifth straight weekly gain. REVIEWING ECONOMIC DATA:  Looking at the last economic data: - CA: Preliminary estimates suggest that in July 2022, Canadian retail sales may decline by 2% month-on-month. In June, retail sales rose 1.1% from the previous month, well above the preliminary forecast for a 0.3% increase and recovering from an upwardly revised 2.3% increase in May. Sales rose in 8 of the 11 sub-sectors, as petrol station turnover rose for the sixth month (3.9%), although volumes were down from the previous period. Retail sales at auto and parts dealers also rose (2.8%), supported by new car dealers (2.9%), furniture stores (1.1%), and clothing and accessories stores (2.1%). As a result, retail trade rose 11% year-on-year in June, a slowdown from 14.4% in May. - TW: In the second quarter of 2022, Taiwan's current account surplus narrowed to $26.55 billion from $29.53 billion a year earlier. The trade surplus in services fell to $2.39 billion from $3.73 billion a year ago, while the surplus in goods rose to $23.88 billion from $1.79 billion. Meanwhile, the primary revenue surplus fell from $5.66 billion to $3.84 billion, while the secondary revenue deficit narrowed to $570 million from $640 million. - EU: The euro zone's current account surplus shrank sharply to 3.2 billion euros in June 2022 from 27.6 billion euros a year earlier, as the value of imports rose due to rising energy costs, and the goods surplus narrowed to 4.3 billion euros from 31.4 billion euros. Meanwhile, the services surplus widened to €16.4 billion from €9.9 billion; the primary revenue deficit fell to €3.0 billion from €3.2 billion, while the secondary revenue gap rose to €14.4 billion from €10.6 billion. Considering the second quarter, the euro area's current account gap was 20.1 billion euros, compared with a surplus of 1 billion euros in the first quarter. - UK: UK public sector net borrowing (excluding public sector banks) was £4.9bn in July 2022, £0.8bn less than in July 2021 but £5.9bn more than before the coronavirus (COVID-19) outbreak in July 2019. It had a surplus of £900 million in July that year. In July 2022, central government revenue was £78.2bn, an increase of £6.1bn on 2021. Of this revenue, taxes rose by £4.6bn to £58.6bn. Central government recurring spending rose by £3.4bn to £76.5bn, mainly due to a £2.3bn increase in interest payable on its debt compared to 2021. At the end of July 2022, public sector net debt excluding public sector banks was £2,388.1 billion, or about 95.5% of GDP, an increase of £188.4 billion or 1.4% of GDP compared to 2021.  - UK: Britain's GfK consumer confidence index fell to a record low of -44 in August 2022 from -41 in July, beating expectations for a fall to -42, as British households continue to grapple with soaring living costs. Joe Staton, director of the client strategy at GfK, said: "All indicators fell, reflecting serious concerns about the soaring cost of living. Anger over the UK economy was the biggest driver of these findings." UK inflation was 10% higher in July than a year ago, accelerating faster in 40 years. The Bank of England expects a further rise in prices to push the UK economy into recession later this year. "Finally reaching a deal has become a nightmare, with the crisis of confidence only intensifying as the fall gets gloomy and the winter gets chilly," Staten added. - UK: In July 2022, UK retail sales unexpectedly rose 0.3% from the previous month, recovering from a decline over the past three months and beating consensus forecasts of 0.2%. Sales at non-store retail (mostly online) rebounded 4.8%, while grocery store sales rose 0.1%, as a series of promotions in July 2022 boosted purchases. On the other hand, sales at motor fuel and non-food stores fell (-0.9%) and (-0.7%), respectively. Sales were 2.3% above February 2020 levels before the pandemic but down from last year. - GE: Annual German producer inflation rose to a record 37.2% in July 2022 from 32.7% a month earlier, beating market expectations of 32%. Energy prices remained the biggest gainers (105.0% vs. 86.1% in June), namely natural gas (163.8%) and electricity (125.4%). Excluding energy, producer prices rose 14.6% year on year. Prices of intermediate goods (19.1%), especially metals (24.1%), fertilizers and nitrogen compounds (100.4%), and cereal flour (48.9%), also saw substantial increases; non-durable consumer goods (16.2%) such as food (21.1%) %); consumer durables (up 10.9%), and capital goods (8%), the biggest gain since September 1975. Monthly producer prices rose 5.3% to an all-time high after printing in June and a consensus increase of 0.6%. - JP: Annual inflation in Japan rose to 2.6% in July 2022 from 2.4% in June. It was the 11th straight month of increases in consumer prices and the fastest pace since April 2014, when fuel and food costs soared after Russia invaded Ukraine and the yen weakened sharply. The main upward pressure comes from food costs (4.4% vs. 3.7% in June), fuel, lighting and water (14.7% vs. 14.0%), clothing (1.4% vs. 1.1%), housing (0.6% vs. 0.6%) , furniture (3.9% vs. 3.6%), education (0.7% vs. 0.7%), culture and entertainment (0.8% vs. 1.2%) and miscellaneous (1.2% vs. 1.2%). On the other hand, transportation costs (-0.2% vs -0.7%) and medical costs (-0-8% vs -1.7%) continued to decline. Core consumer prices rose 2.4% year-on-year, the highest since December 2014, after rising 2.2% in June, in line with forecasts and above the Bank of Japan's 2% target for the fourth straight month. On a monthly basis, consumer prices rose 0.5%, the highest level since January 2021, after being flat in June. LOOKING AHEAD:    Today, investors will receive the following: - EUR: German Buba Monthly Report. - CAD: NHPI m/m KEY EQUITY & BOND MARKET DRIVERS: - IT: Italy's 10-year government bond yield rose to 3.5 percent in August, its highest level in nearly a month, on bets that central banks will continue to prioritize fighting inflation and aggressively tighten monetary policy. ECB board member Isabel Schnabel said the inflation outlook in the eurozone had not improved since the central bank's last meeting, raising the risk of a sharp rate hike. In July, the European Central Bank raised more interest rates by 50 basis points than expected. Political uncertainty ahead of the Italian election also added pressure on Italy's debt. Polls back a three-party right-wing coalition, suggesting the brother of Italian leader Giorgio Meloni will be the next prime minister. Any changes to the ongoing reforms could lead to more than 200 billion euros in recovery funding. The spread between 10-year British and German bunds widened sharply to more than 230 basis points, signaling increased perceptions of Italian debt risk. - GE: German 10-year bond yields topped 1.2 percent in August, the highest level in nearly a month, as concerns over inflation reinforced expectations that major central banks will continue to tighten policy aggressively. ECB board member Isabel Schnabel said the ECB's inflation outlook has not improved since raising interest rates by 50 basis points in July. The latest CPI data confirmed that inflation in the eurozone hit a record 8.9% in July. Meanwhile, Europe's energy crisis continues due to dwindling supplies from Russia, with soaring gas prices further threatening the economic outlook and inflation. Germany's Federal Network Agency said the country needs to cut its natural gas use by 20 percent to avoid winter rationing. In addition, the latest data showed that investor confidence in the German economy fell in August to its lowest level since October 2008 as high heating and energy costs weighed on the outlook. - CA: Canada's 10-year government bond yield rose above 2.9 percent, its highest level in four weeks, as investors continued to assess the Bank of Canada's guidance after releasing new consumer price data. While headline inflation eased in July from a 39-year high in the previous month, the central bank's core consumer price index continued its accelerating trend. Rising costs net of energy costs has fueled speculation that the central bank is inclined to maintain its hawkish stance. At its last meeting, the Bank of China surprised markets by raising its benchmark interest rate by 100 basis points in July while signaling further tightening to rein in inflation well above its 2 percent target. - US: U.S. stock futures fell 1% on Friday as investors worried that prolonged monetary tightening by the Federal Reserve could drag the world's largest economy into recession. Despite some signs that inflation may peak, the U.S. central bank has confirmed that a solid turnaround is unlikely until inflation returns to its 2% target. St. Louis Fed President James Bullard, Minneapolis Federal Reserve Neel Kashkari, and San Francisco Fed President Mary Daly are the latest policymakers to echo this sentiment. The major indexes were mixed last week, with the Dow and S&P 500 remaining in positive territory, while the tech-heavy Nasdaq Composite was on track to end a four-week rally. STOCK MARKET SECTORS: - High: Health Care, Energy. - Low: Consumer Discretionary, Communication Services, Financials, Information Technology. TOP CURRENCY & COMMODITIES MARKET DRIVERS:  - EUR: The euro weakened to below $1.01, near the key $1 parity level, as investors balanced the ECB's policy tightening path with the region's economic outlook. The European Central Bank is expected to raise interest rates by 50 basis points in September, following a similar move in July to rein in soaring inflation, but the outlook for the region is worrying due to an energy crisis sparked by dwindling supplies in Russia. Electricity prices in Europe recovered to record levels in August amid concerns that economies, particularly Germany, would not be able to secure winter power reserves. The latest data showed that the euro zone economy grew 0.6% in the second quarter, down from a preliminary estimate of 0.7%, and investor confidence in the German economy fell in August to its lowest level since October 2008. Elsewhere, the dollar was again near 20-year highs, fueled by hawkish comments from Fed officials. - GBP: Sterling fell to $1.18, near its lowest level since March 2020, on growing fears that a spike in domestic inflation would mean higher interest rates and a weakening UK economy. UK inflation rose to a 40-year high of 10.1% in July, adding to speculation that the Bank of England will raise borrowing costs by another 50 basis points in September. In addition, retail sales unexpectedly rebounded in July, and the latest jobs report showed the labor market remained tight but began to cool. As a result, financial markets see a 96% chance that the Bank of England will raise its main interest rate by 0.5 percentage points to 2.25% at its next meeting on September 15, which would be the seventh hike in a row and push borrowing costs to 2.25%. The highest level since 2008. In August, the central bank raised interest rates by 50 basis points for the first time since 1995 and expected inflation to peak at 11.1% in October, and the country will enter a recession in the fourth quarter that will last for five quarters. - CNY: The offshore yuan weakened by more than 6.8 against the dollar, near its lowest level in 23 months, as a shaky economy is forcing China's central bank to ease more, while the Federal Reserve says it will keep raising interest rates to catch up before inflation. The People's Bank of China is expected to cut the country's benchmark lending rate for corporate loans and mortgages on Monday, following a surprise cut to two key interest rates earlier last week, to boost demand and counter signs of an economic slowdown. Goldman Sachs and Nomura on Thursday cut their GDP forecasts for China, citing weak demand, Covid-19-related uncertainty, and power shortages. However, analysts have warned that the central bank has little leeway amid persistent inflationary pressures, rising global interest rates, and the risk of rising capital outflows. - JPY: The yen weakened by more than 136 yen against the dollar, falling to its lowest level in three weeks, as rising domestic inflation failed to support the yen amid a widening divergence in monetary policy. Headline inflation in Japan rose 2.6 percent year-on-year in July from 2.4 percent in June, accelerating at the fastest pace since April 2014. In addition, the core consumer price index rose 2.4% annually from 2.2% in June, the highest level since December 2014 and above the central bank's 2% target for the fourth consecutive month. The yen came under pressure last week as the Bank of Japan is expected to keep interest rates ultra-low, despite the Federal Reserve's pledge to adopt a tougher policy to fight inflation. The yen also suffered outflows as investors opted for the safety of the dollar after disappointing Chinese and U.S. data rekindled fears of a global recession. - USD: The dollar index hovered at a one-month high above 107.5 on Friday, up about 2 percent last week, buoyed by hawkish rhetoric from Fed officials who said they would continue to raise interest rates to slash inflation. In the latest central bank comments, St. Louis Fed President James Bullard said he was considering backing a third straight 75 basis point rate hike in September and said he was not ready to say the economy had already experienced a spike in inflation during the worst period. San Francisco Fed President Mary Daly also stressed the need to push rates into the cap, while Kansas City Fed President Esther George said she and her colleagues were "completely convinced" Tightening will not stop until inflation falls. Traders will get more insight from Federal Reserve Chairman Jerome Powell at next week's Jackson Hole annual symposium CHART OF THE DAY: On Friday, the ruble-based MOEX Russia index pared early losses to just over 2,195 points as investors focused on the energy market and its possible impact on Russia's economic outlook. Bank stocks led gains, closing the session up more than 2% on average, with TCS Group up 8%, still benefiting from the CBR's statement that Russia's banking sector does not require additional systemic capitalization. Meanwhile, stronger grain supplies supported Russian fertilizers, with Phosagro also benefiting from strong quarterly results. On the other hand, fears of a recession in Europe have weighed on demand from gas companies Gazprom and Novatek, which has eased amid a surge in TTF gas prices last week. Additionally, MTS stock fell nearly 1% after a quarterly report showing a 36% drop in net income. For the week, the Moscow Exchange's benchmark index rose 2.2 percent. - Ruble-based MOEX Russia index - D1, Resistance (target zone) around ~ 2494, Support around  ~ 1734