Market Update

Monthly Market Roundup

Monthly Market Roundup
Key takeaways
1

European equity markets rebounded after initial turbulence from weaker US labour data.

2

The Bank of England cut interest rates to 5.0%, its first reduction in over four years.

3

Korea lagged as technology stocks dropped following a sell-off in their US peers.

Summary of markets in August

In August, European equity markets rebounded to post positive returns despite early turbulence, with strong performances in real estate and healthcare. Eurozone inflation fell to a three-year low, boosting expectations for ECB rate cuts. The UK's market rose on the back of the Bank of England’s rate cut and solid economic growth. The US also saw gains on anticipated Fed rate cuts, while Asia Pacific and emerging markets, particularly Taiwan and Brazil, performed well.

European equity markets had a turbulent start due to weaker US labour data but recovered as optimistic economic data emerged, posting positive returns in August.

Real Estate, communication services, and healthcare led, while technology and energy lagged. The case for an ECB (European Central Bank) rate cut was strengthened by slowing wage growth and a drop in eurozone inflation to 2.2%.

Eurozone Purchasing Managers’ Index (PMIs) were mixed but suggested stabilising growth. Unemployment fell to 6.4%, though sentiment varied by country. 

The UK equity market closed higher in August as positive economic data supported UK equities, despite US recession fears.

The Bank of England (BoE) cut interest rates to 5.0%, marking its first reduction in over four years, while cautioning against further rapid cuts.

A global market sell-off in early August, triggered by weak US employment data, was followed by a strong rally. UK inflation rose to 2.2%, below expectations, while core inflation fell to 3.3%.t.

After a shaky start, US equity markets gained as investors anticipated a Federal Reserve (Fed) rate cut in September. Interest rate-sensitive sectors like real estate and utilities did well, while energy and consumer discretionary sectors lagged.

US Consumer Price Index (CPI) inflation fell to 2.9%, below the 3.0% expectation, fuelling rate cut hopes. Fed Chair Jerome Powell signalled possible cuts, reinforcing these expectations.

Despite slower nonfarm payroll growth and rising unemployment, Second Quarter Gross Domestic Product (GPD) was revised up to 3.0%, and PMI slightly decreased to 54.3.

Asia Pacific equity markets posted a positive month. The strongest performing markets in the region were Indonesia and Thailand.

Korea lagged as technology stocks dropped following a sell-off in their US peers. Japanese equities fell sharply as a rapid rally in the yen triggered a brutal carry trade unwinding, though the market recovered lost ground.

Overall regional returns were held back by China and India’s relative underperformance. Chinese financials advanced, but materials and utilities detracted.

Emerging equity markets registered a positive month. The strongest performing markets were Brazil, with financial, energy, and consumer stocks adding value.

Brazil's unemployment rate fell to 6.8%, and retail sales volumes rose 4% from a year ago. The Banco Central do Brasil maintained its Selic rate at 10.50%.

The Mexican stock market fell due to a depreciating peso and rising bond yields. Chile gained as the Banco Central de Chile paused rate cuts. South African equities were supported by the formation of a national unity government.

The month began with volatility following a weak US jobs report, sparking recession fears. Market turmoil subsided after positive US economic data (robust retail sales) and reassuring comments from Bank of Japan (BOJ) Deputy Governor Uchida.

Government bonds posted a positive month, led by US Treasuries, which returned 1.31%. The Fed signalled readiness to cut rates in September as inflation eased.

ECB rate cuts were anticipated after eurozone inflation fell. Corporate bonds performed well, with US investment grade returning 1.53% and high yield outperforming.

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