Market Summary for the last week of August 2023

The week of August 28th to September 1st, 2023, saw a delicate balance between economic indicators and market sentiment play out in markets. The United States enjoyed what appears to be Goldilocks labor conditions, with strong job growth and a tightening labor market. However, consumer confidence declined, reflecting concerns about future economic prospects. In the Eurozone, inflation remained a challenge, while China implemented some limited but long-awaited policy measures to support its housing market and stimulate consumption. These measures are being instigated because the economy is weak and it remains an open question whether this will be enough to kick start the spluttering, imbalanced Chinese economy.

US tech and Chinese stocks both bounced by around 2% along with Australia and Japan while Europe and the rest of the US market was flat.

‍

United States: A Goldilocks Labor Market and Consumer Confidence Concerns

The United States started the week with encouraging news on the labor front. The country added 187,000 new jobs in August, surpassing expectations. While the unemployment rate rose slightly to 3.8%, it was due to a positive influx of new workers into the labor force. The number of unfilled jobs per unemployed person decreased, indicating a tightening labor market.

However, consumer confidence took a hit as the Conference Board Consumer Confidence Index fell below expectations. The Present Situation Index and Expectations Index both declined, reflecting concerns about the future. Additionally, personal spending continued to outpace income growth, leading to a decline in savings rates. This suggests that consumers may be struggling to maintain their standard of living based on their current income levels.

The estimate for US GDP growth in the second quarter was revised down to 2.1%, signaling a slight moderation in economic expansion. Inflation remained a concern, with the core PCE deflator for July in line with expectations at 4.2% year-on-year. The housing market, on the other hand, remained resilient, with the S&P Case-Shiller Home Price Index reaching levels on par with the all-time high recorded a year earlier.

‍

Eurozone: Inflation Trends and CPI Data

In the Eurozone, inflation remained a topic of interest. Eurostat reported a marginal decrease in core CPI for August, with non-energy industrial good prices and services showing modest increases. Headline CPI remained unchanged, driven by higher energy prices and strength in non-energy industrial goods. These figures highlighted the ongoing challenge of managing inflationary pressures in the region.

‍

China: Policy Measures and PMI Data

In China, the People's Bank of China (PBoC) implemented measures aimed at stabilizing the housing market and boosting consumption. These measures included lower mortgage rates, deposit rates, and downpayment requirements. Additionally, PMI data from the National Bureau of Statistics (NBS) and Caixin indicated mixed results. While the NBS Manufacturing PMI showed a slight improvement, the non-manufacturing PMI declined. The producer price and purchase price indices rose, suggesting potential positive developments for the producer price index.

These policy measures and PMI data indicated a cautious effort by Chinese authorities to support sentiment and stimulate consumption. However, concerns remained about the urgency of policy changes and their long-term impact on investor psychology.

‍

Australian Market Updates and Corporate News

The Australian share market was up just over 2% last week thanks to solid performance from banks and resources and despite falls by Fortescue Metals Group and Qantas. The former saw a significant drop in share prices following the resignation of key executives, including the former RBA deputy governor Guy Debelle. Qantas faced more challenges in the form  of an ACCC lawsuit accusing the firm of selling tickets for canceled flights. Santos on the other hand rose sharply rising after selling a stake in its PNG LNG project.

‍