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Investment Research

Weekly Global Market Update - 26th August 2024

SR Team - 26 August 2024

As the heat of summer begins to wane, global financial markets are heating up with a flurry of activity, as investors are forced to navigate a complex landscape marked by the interplay of economic indicators, central bank policies, and geopolitical developments. This week's Global Market Update provides an overview of the key market events across Equities, Fixed Income, Currencies, and Commodities. We have also provided an overview of the week's significant economic highlights and our market outlook for the week ahead.

Equities and Commodities

Global equities experienced a positive week, with major indices posting gains. The S&P 500 in the United States rose 1.47%, fueled by growing expectations of a Federal Reserve rate cut in September. In Europe, the STOXX 600 increased by 1.32%, supported by economic data that met expectations. Meanwhile, Japan's TOPIX saw a modest gain of 0.23%, continuing its recovery from earlier losses.

In the commodities market, oil prices remained subdued due to ongoing concerns about a global economic slowdown. West Texas Intermediate (WTI) and Brent crude closed lower at $74.83 and $79.02 per barrel, respectively. Conversely, gold prices hit an all-time high midweek, closing at $2,546.30 per troy ounce, driven by low interest rates and a weaker US dollar.

Fixed Income and Currencies

Global bond yields mostly declined, with the 2-Year US Treasury yield ending the week at 3.91% and the 10-Year yield at 3.81%. In Europe, the 10-Year German Bund yield fell to 2.23%. The US dollar weakened against major currencies, with the dollar index dropping by 1.83%. The euro strengthened to $1.1188, and the Japanese yen appreciated to ¥144.29 per dollar.

Economic Highlights

The US labour market showed signs of moderation, with revised payroll growth figures indicating a slower pace than previously reported. Despite this, economists remain optimistic about the US economy's resilience, citing strong GDP growth and the potential of the Federal Reserve's policy easing measures. The minutes from the Federal Open Market Committee (FOMC) meeting suggested that a majority of participants favoured easing policy at the next meeting if economic conditions evolved as expected.

In Europe, inflation data indicated a slowdown in wage growth, reinforcing expectations for a European Central Bank rate cut in September. Japan's core CPI rose to 2.7% year-over-year in July, aligning with market expectations.

Global Market Outlook

Investors are closely watching upcoming economic data releases, particularly inflation figures from the US and Eurozone, which will provide further insights into central banks' monetary policy directions. The Federal Reserve's potential rate cut in September remains a focal point for market participants, alongside ongoing geopolitical developments and their impact on global trade and economic growth.

The flash PMI data for August provided some encouraging news on economic growth in developed markets, with the US, UK, and Japan showing robust expansion. The Eurozone also reported an improved growth rate, although it was still lagging behind the other economies. However, underlying concerns remain, particularly in the manufacturing sector, which has shown signs of weakness. While currently strong, the services sector may also face challenges if manufacturing weakness spreads.

As we move into the final days of August, financial markets are poised at a critical juncture, and investors must remain vigilant, with central banks contemplating rate cuts and economic data continuing to shape the narrative. The interplay of these factors will be crucial in determining market trajectories in the coming weeks. As a consequence, investors need to continue to carefully assess their portfolios and ensure their strategies align with the ever evolving economic landscape.