Weekly Market Update

Central banks are data-dependant as market awaits rate decisions

August 28, 2023
Most markets were flat to slightly positive last week and fairly stable apart from the Nasdaq which traded in a 3% Range.

Fed Chair Jerome Powell's Speech at Jackson Hole Symposium

The week began with great anticipation for Fed Chair Jerome Powell's speech at the Jackson Hole Economic Symposium. While some expected ground-breaking announcements, Powell's speech proved to be relatively anticlimactic. Doves interpreted his remarks as a signal that there would be no immediate plans for additional rate hikes, while hawks noted that Powell mentioned hypothetical situations that could warrant tightening in the future. Overall, Powell emphasized the need to anchor inflation at 2% and take a gradual approach to assess the impact of previous rate hikes.

European Central Bank (ECB) President Christine Lagarde's Message

In a similar vein, ECB President Christine Lagarde reiterated the ECB's commitment to maintaining high interest rates for as long as necessary to achieve the 2% inflation target in the Eurozone. This aligns with the ECB's ongoing efforts to stimulate economic growth.

Eurozone PMI Data and Consumer Confidence

However, economic data from the Eurozone painted a less optimistic picture. The Eurozone, French, and German Purchasing Managers' Index (PMI) readings were weaker than expected, with services falling below consensus and manufacturing showing slight improvement. Additionally, the European Commission's index of Eurozone consumer confidence fell to -16, indicating a negative sentiment among consumers.

UK PMI Data and US Housing Market

In the UK, PMI data fell short of expectations, particularly in the manufacturing and services sectors. On the other hand, the US housing market experienced a significant decline in existing home sales, reaching the lowest level since the aftermath of the US housing bubble in 2010. This was attributed to rising mortgage rates, which deterred potential buyers.

China Lending Policy Rate Reductions

In China, the reductions in lending policy rates were less significant than anticipated. The People's Bank of China (PBoC) reduced the 1-Year Medium-Term Lending Facility Rate by 15 basis points to 2.50%. However, the 1-Year Loan Prime Rate was only decreased by 10 basis points to 3.45%, while the 5-Year rate remained unchanged at 4.20%. This conservative approach may be aimed at preserving banking sector profitability and preventing excessive depreciation of the Chinese yuan.

Overall though, several factors contributed to the erosion of confidence in China's economy. Disappointing data, signs of deflation, record youth unemployment, and continued liquidity issues in the debt-laden property sector played a significant role. These factors have raised concerns about China's economic growth and the government's limited options to address the downturn. As a result, there has been an increased prospect of accelerated capital outflows, with overseas funds selling the equivalent of USD 10.7 billion from the mainland market over a 13-day trading period.

Despite these challenges, analysts believe that the risks of a systemic crisis stemming from China's property sector are relatively low. Increased regulation has led to a smaller "shadow" banking system, including trusts, compared to previous years. While risks persist on the periphery of the financial system, they are potentially resolvable through regulatory intervention. Nevertheless, analysts continue to monitor developments in the property sector and potential spillover effects on other sectors.

The Australian Reporting Season

The Australian stock market experienced mixed results during the reporting season. The retail sector, in particular, last week showcased the contrasting performances we have seen in this reporting season. Premier Investments saw a surge of 12.3% after forecasting near double-digit sales growth, while Breville Group experienced a nearly 10% increase in its stock price, primarily driven by strong sales of coffee machines. However, A2 Milk faced a decline of over 13% as the company flagged a slowdown in demand, influenced by falling birth rates in China.

Mining giant BHP reported revenue and profits slightly below expectations, contributing negatively to the overall performance of the Australian stock market. On the other hand, Woodside, a major player in the gas industry, managed to avoid industrial action that could have threatened global LNG supply, positively impacting the market.

Coles, a prominent supermarket chain, saw a decrease in its share price as it missed expectations, while investors responded positively to Woolworths' results. Ramsay Healthcare suffered a decline in its share price and faced challenges, and Wisetech experienced a significant setback as its shares were slashed by a fifth due to the company's failure to deliver guidance. Qantas, however, reported soaring profits and announced another buyback scheme, further boosting the market.

Looking Ahead

Upcoming US Labor Market Reports

Looking ahead, the US labor market reports will be closely watched. The Job Opening and Labor Turnover Survey (JOLTS) will provide insights into the number of unfilled jobs and the voluntary quit rate. Additionally, the upcoming payroll report is expected to show an increase of 168,000 nonfarm jobs, with an unchanged unemployment rate of 3.5%. Average hourly earnings are projected to rise by 0.3% month-on-month and 4.3% year-on-year.

Eurozone Inflation Data and ECB Rate Hike Expectations

The Eurozone preliminary inflation data for August will be significant in determining the likelihood of additional ECB rate hikes. Market expectations suggest a 34% chance of a 25 basis points hike in September, rising to 52% by October. However, the potential risk of a recession in the second half of 2023 may limit the ECB's ability to tighten monetary policy further.

US Home Prices and Eurozone Inflation Readings

In the US, the S&P Case-Shiller Home Price Index is expected to show a 0.8% month-on-month increase in home prices, approaching the record high of June 2022. Meanwhile, Eurozone inflation readings will provide further insights into the trajectory of inflation and its implications for ECB rate hikes. It is crucial to closely monitor these indicators to gauge the overall economic landscape.

Markets Retreat on Fading Rate Cut Hopes Before Late Rally

August 2, 2024
Risk assets broadly declined last week as economic data showed resilience and central banks pushed back against aggressive market pricing for rate cuts, puncturing investor hopes.
Read More

Global Equities Up on Hopes of Economic Stimulus

August 2, 2024
Last week saw a notable upswing in global equities, driven by optimism over a potential economic stimulus in China and dubious results in corporate earnings.
Read More

U.S. Jobs Report Sparks Market Shift

August 2, 2024
Amid a mixed bag of US corporate earnings and a strong jobs report fueling rate hike expectations, global markets face contrasting fortunes, highlighting the complexity of forecasting economic trends in a time of technological growth and geopolitical uncertainty.
Read More

S&P 500 Breaks 5,000 Amid Mixed Economic Signals and Rate Cut Speculations

August 2, 2024
It was an up and down week for markets after a strong finish the prior week.
Read More

Unpacking a Volatile Week Amid Inflation Warnings and Surprising Strengths

August 2, 2024
Markets gyrated last week as hotter-than-expected US inflation data sparked an initial tech rout before recovering. Meanwhile better-than-feared earnings results and recession-resilient emerging markets outperformed.
Read More

Global Markets Navigate Mixed Signals: Earnings Surges, Inflation Divergences, and the Persistent Volatility Ahead

August 2, 2024
Global markets were mixed this week as investors digested the latest economic data and corporate earnings results.
Read More

Equities turbulent but resilient as interest rates rise

August 2, 2024
Last week the S&P 500 traded in a 3% range, having done a 2% round trip on Thursday, followed by a 3% fall on Friday after the inflation data release and then another almost 2% round trip yesterday. Emerging markets were the worst performing, down 4% for the week. Taking a step back though, most equity markets haven’t given back that much of their gains from January, while Europe and the Nasdaq remain up 10% for the year.
Read More

Markets Up Despite Rising Bond Yields and Inflationary Data

August 2, 2024
Bond yields were up again last week but so were equity markets which was a nice change that lead to the first up week in the last four. In fact, while markets have been on the back foot recently, most commentators have been pleasantly surprised that they haven’t reacted too badly to an apparent wind shift in the gusty inflationary data.
Read More

SVB bankruptcy triggers swift response from the Fed

August 2, 2024
On Friday morning Silicon Valley Bank (SVB) had been the 16th largest US bank and a successful S&P 500 company, but by Saturday morning it was bankrupt after a sudden run on its deposit base had rendered it unviable.
Read More

Oh, what a week!

August 2, 2024
Oh what a week! The Four Seasons hit might seem a bit upbeat for the occasion of a banking crisis, but the market has at least got its mojo back in the last few days.
Read More

US Tech and Emerging Markets Lead Recovery

August 2, 2024
Markets have calmed down a great deal in the last two weeks and more recently have mounted a bit of a recovery, with US tech and emerging markets leading the way.
Read More

Markets have mixed feelings about a slowing US economy

August 2, 2024
With many markets closed for a few days either side of the weekend and market liquidity very low, financial news has been mercifully subdued. There was mini-scare at the end of last week as a number of jobs-related reports came out which suggested that the overheating US economy might be slowing down.
Read More

Markets slid again last week, with a concentrated sell off in US tech

August 2, 2024
Markets slid again last week but the selling was concentrated in US tech, most of which is down 10% or so this year. Much of last week’s selling occurred in the last 2 sessions of the week.
Read More

Recession fears build, yet equity markets end the week higher

August 2, 2024
Fears of a US recession later this year gathered pace last week and the US equity market jumped by almost 7% and the Nasdaq was up some 9%.
Read More

Inflation - Flash Update

August 2, 2024
In light of the recent inflation data coming out of the US, we dive in to why the market is so upset about a 0.1% increase in prices, and what this means from an Australian investor's perspective.
Read More

Interest rate sensitivity persists into the new year

August 2, 2024
During the last few weeks, the prospect of rising interest rate expectations continued to grip markets, as the soft landing/rapid disinflation thesis was tested.
Read More

Strong start to the year continues despite recession concerns

August 2, 2024
As the world’s elite gathered in a snowless Davos, markets focused on much more immediate concerns, starting with the continuing wave of layoffs in corporate America. Amazon, Microsoft, Alphabet (Google’s parent company), Salesforce and Goldman Sachs, among others, took turns to announce staff cuts. It would appear boardrooms and CEOs are lending some credence to the possibility of a recession in 2023.
Read More

Equities turbulent but resilient as interest rates rise

August 2, 2024
Last week the S&P 500 traded in a 3% range, having done a 2% round trip on Thursday, followed by a 3% fall on Friday after the inflation data release and then another almost 2% round trip yesterday. Emerging markets were the worst performing, down 4% for the week. Taking a step back though, most equity markets haven’t given back that much of their gains from January, while Europe and the Nasdaq remain up 10% for the year.
Read More

Helping your clients assess the climate impact of their Portfolio

August 2, 2024
Nathan Fradley explains how the ethosesg technology can help you assess and design an ethical portfolio that aligns to an investor’s personal values.
Read More

Carbon credits and investing – is it the outcome we expect?

August 2, 2024
ETFs that invest in carbon credits are now available. Why should we assume that their price will go up over time? And does buying a carbon credit ETF actually contribute positively to emissions reduction? Will it actually generate the outcome investors are expecting? This article explores the issues around investing in carbon credits.
Read More

Better World makes a difference with investment in renewables

August 2, 2024
There are many direct assets and funds that contribute positively to climate action within the InvestSense Better World Portfolios. Meridian Energy is one of the stand-out direct assets in the portfolio with a climate energy focus.
Read More

Bad news equals good news

August 2, 2024
In recent years professional investors have got increasingly used to the fact that good news is bad news for markets because higher interest rates are likely to be necessary, and of course vice-versa. However, last week the effect was stronger than ever and stocks rallied mid-week amidst reports of widespread lay-offs and expectations of a weak US jobs report.
Read More

‘Buy the dip’ opportunism start surfacing

August 2, 2024
The US market finally market caught a bid last week. Early in the week the market was down few percent after an earnings miss by ad dependent social media platform Snap (of Snapchat fame) combined with weak guidance raised more doubts about the economy and economic resilience of tech companies.
Read More

US momentarily dips into official bear market territory

August 2, 2024
The seventh negative week in a row for the US sent it briefly into official bear market territory before it recovered slightly late on Friday. The world’s largest stocks (Apple, Microsoft Amazon and Google) are all down 25%.
Read More

How Mark Lewin saved 13 hours a week with Managed Accounts

August 2, 2024
Mark Lewin was a financial planner, but is now the Director of Back Office Heros. In his planning business he gained significant efficiencies by recommending and implementing managed accounts for his clients. He tells us how...
Read More
Icon of a letter

InvestSense insights, delivered straight to your inbox.

Icon of a letter

Get the latest industry news

Icon of a letter

Get the latest industry news

Icon of a letter

Get the latest industry news