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Markets in a minute 12th August 2024

RECOVERY

Last week, global equity markets recovered from sharp falls on Monday. The stability came after the Bank of Japan suggested that rates would not be raised further this year and stocks were further supported by US data that eased recession fears.

This week, US data is set to take centre stage. Although July inflation data is released on Wednesday, more focus is likely to be on retail sales for the same month (July). The latter is set to give an important gauge of household consumption in light of some soft labour market data. This, in turn, feeds into how much rates might be cut this year.

Markets in a minute will be taking a break for two weeks and will return on Monday 2nd September.

Equity markets recovered from sharp falls on Monday after the Bank of Japan suggested that rates would not be increased further in 2024 while US data eased fears of a recession. The S&P 500 finished the week down by 0.4% and the Stoxx 600 fell marginally by around 0.1%, a healthy rebound after falls of 2-3% on Monday.

US ISM services - a survey of services companies aimed at gauging current and expected business conditions - recovered in July. The index rose by more than markets expected and many subcomponnents also improved from June, including employment, new orders and business activity.

Initial jobless claims for the week before were also lower than expected, which helped push up the S&P 500 by 2.3% on Thursday, its largest daily gain since November 2022. Overall, these datapoints eased fears around recession risks after soft July labour data the previous week.

There was also some positive data in Germany, with June industrial production and factory orders both rebounding somewhat from falls in May. Data was still soft overall in Q2 but the improvment towards the end of the period was deemed to be positive.

Central bank speakers sought to ease concerns around slowing growth and high interest rates. A number of Fed speakers indicated the central bank's willingness to cut rates should growth deteriorate and/or if there were a risk to financial stability.

Reduced fears around a potential recession helped push bond yields higher (bond prices fall as bond yields rise). Last week, the US Treasury 10-year yield rose by around 13bps to 3.93% and the equivalent Bund was up by some 6bps to 2.22%.

This week, US data is set to take centre stage. Although July inflation data is released on Wednesday, more focus is likely to be on retail sales for the same month (July). The latter is set to give an important gauge of household consumption in light of recent soft labour market data. This, in turn, feeds into how much rates might be cut this year.

Tue 13th

US - NFIB small business survey, producer prices

Germany - ZEW business survey

Wed 14th

US - Consumer prices

Eurozone - Employment, industrial production

Thu 15th

US - Retail sales, industrial production, initial jobless claims

Fri 16th

US - Consumer sentiment

This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.

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