Global Market Summary

The global investment market experienced mixed results during the second week of August. While some regions showed signs of volatility and fragility, others presented opportunities for growth and resilience. While the US inflation data provided a brief boost to stocks, concerns arose as China slipped into deflation. The Chinese market was the worst performing, although the losses were concentrated in the property and healthcare sectors. The usually volatile large Chinese technology and consumer stocks fell only slightly, while Alibaba reported higher than expected earnings growth and was up slightly for the week.

The Australian Market

The Reserve Bank of Australia (RBA) Governor Philip Lowe refrained from predicting peak rates, suggesting a potential plateau. Additionally, the reporting season got underway in Australia. Commonwealth Bank of Australia (CBA) and Suncorp reported their results, setting the stage for other bank quarterlies expected in the following week. James Hardie emerged as a standout performer, with a notable share price reaction. AMP shares displayed resilience despite the company's decision to pause its capital return. Downer's performance was particularly weak, presenting challenges for the company. The market will closely monitor its future developments. Property trusts faced challenges related to debt and vacancies, while the materials sector saw contrasting outcomes for Coronado Global Resources and Pilbara Minerals. The retail sector also displayed divergent performances, with Nick Scali delivering strong results, while Baby Bunting faced difficulties.

Recent Global Themes - Fragmentation and the resilience of EMs

While China and the US were amongst the worst performing markets last week, other regions fared better and suffered less intra-day volatility. As the world becomes increasingly characterized by competing defence and economic blocs, emerging markets are emerging as more important players in an increasingly multi-polar geopolitical and investment landscape. These multi-aligned nations are set to grow in power and influence, as the US and China focus on each other. In this context, countries and companies are prioritizing security and resiliency over maximum efficiency, leading to a rewiring of supply chains and a shift in investment preferences. Emerging market central banks are also nearing the end of their rate hiking cycles and implementing policy rate cuts contribute to this resilience. However, it is important to note that EMs are not immune to risks, particularly in global crisis situations.

Ref: T.Rowe Price, FT.com, Blackrock, Ausbiz

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