NEW HEIGHTS
Last week was a strong week for equity markets as hopes for the start of a US rate cutting cycle and fresh hopes for AI productivity helped the S&P, NASDAQ and DJIA hit new all-time highs.
This week, all focus will be on the US Federal Reserve rate decision to be announced on Wednesday. After a string of recent data has shown continued weakness in the US jobs market, investors are unanimously expecting a rate cut announcement.
With summer behind us and investors refocusing, investors face a complex backdrop. Click on the button below to view our Chief Investment Strategist, Lenny McLoughlin, breaking down the key dynamics to watch – and how they may influence asset allocation, risk, and opportunity.
US Inflation were the main data released last week - both showed an increase in August. The Consumer Price Index (CPI) indicated that headline inflation increased from July's 2.7% to reach 2.9%. Core inflation (which excludes volatile food & energy prices) increased to 3.1% annually.
Producer Price Information (PPI) presented a different picture with the August number moderating to 2.6% down from last month's 3.1% reading. This may have helped mute any reaction to the increase in CPI & Core inflation. In any case, investors seemed happy to look through last week's data and maintain bets on rate cuts coming through.
In Europe, the ECB kept rates on hold as expected. ECB President Lagarde emphasised that the eurozone economy was performing well with inflation stabilising at 2%. The bank upgraded its' inflation & growth projections for this year - a move that was widely seen as indicating the end of the current rate cutting cycle.
Global equities had a strong week last week. Investors maintained enthusiasm for the US Fed to begin to cut rates and the AI & tech sector received a surprise boost with Oracle guiding to significantly higher profits on the back of winning some major contracts. The S&P500 finished the week up 1.59%, the NASDAQ rose 2.03% while, on this side of the Atlantic, the Stoxx 600 finished up 1.03%
Bond yields were up last week in both the US and Europe (bond yields fall as bond prices rise), the 10-year Treasury yield rose by 3bps over the week to 4.07% in advance of the Fed's FOMC meeting on Wednesday. In Europe, the German bund equivalent rose by 4bps to 2.71% as the ECB signalled it was at the end of its' cutting cycle.
- Tue 16th US - Retail Sales
- Wed 17th US - Federal Reserve FOMC rate decision • Bank of Canada rate decision
- Thu 18th UK - Bank of England rate decision
- Fri 19th JPN - Bank of Japan rate Decision
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.