Market In Review – Market Slide On Lower Volatility

■ ECB raises Quantitative Easing issue share limit from 25% to 33%

■ ECB cuts inflation and GDP forecasts for 2015-2017

■ Dovish CBS sends EUR/USD down more than 1%, to 1.1087

■ JPY appreciates on muted inflation indications

■ Nonfarm drops to 173K in Aug, but July's print gets upward boost

The Chicago VIX index dipped to as low as 23.45 points during the week. At more than 25 points lower than the peak levels which it visited on "Black Monday", two weeks ago, one would expect a rather settled market behavior. Judging by the weekly score of major indices, however, it seems that Black Monday's mood still prevails. The Hang Seng stood out to the negative, losing close to 3.6%, on a shortened 4-day trading week. European stocks also recorded significant declines, with the DAX losing over 2.5% and the FTSE 100 a tad more than 2.4%. The S&P 500 (SPY) dropped no less than 3.4% during the week, trailed closely by the Dow Jones (DIA), which shed a total of 3.25% and the Nasdaq (QQQ) with a 2.99% decrease.

Economic indicators continue to be mixed

Economic events refuse to provide a clear outlook for the markets. These included worsening indications on the Chinese economy, with August's Manufacturing Purchasing Mangers' Index sliding to a level of 49.7, from, 50 points in July. Some monetary boost was provided on Thursday, by the European Central Bank. In spite of keeping all three key rates unchanged, ECB President Mario Draghi increased the issue share limit on the bank's quantitative easing, from 25% to 33%. This was done in tandem with the ECB revealing growing pessimism over the outlook of the Euro-area, as it cut both its inflation, as well as Gross Domestic Product forecast for 2015-2017.

The EUR has weakened considerably, with EUR/USD sliding over a percentage point, to as low as 1.1087, after Draghi's QE announcement – the lowest for the currency pair since August 20^th. On the week as a whole, however, the EUR weakened just 0.32% vs. the USD, and actually strengthened 1.08% vs. the GBP. The JPY saw significant appreciation this week, adding no less than 2.5% vs. the EUR, and 2.2% vs. the USD. The Japanese economy still seems to suffer from lack of inflation, with Friday seeing Japanese Labor Cash Earnings data indicating a mere 0.6% year over year increase, which could explain why the JPY makes such a comfortable haven in these turbulent times.

Economic indications on the U.S. labor force market further refuse to donate a clear view. This includes Wednesday's ADP Employment  report, which saw business add 190K jobs in August – 5K more than July, but 15K less than what analysts predicted. Likewise, on Friday, August's Nonfarm Payrolls suggested that just 173K jobs were added to the economy during the month, far below analysts' expectations for 217K. But on the other hand, July's Nonfarm print saw a significant upward boost, to no less than 245K and the U.S. Unemployment rate dropped to just 5.1%.