This week’s market update highlights the latest economic news and general market performance across the UK, US, EU and Asia.
The key takeaways:
📉 Nikkei nosedives –The Nikkei had its biggest single-day drop since 1987, triggered by Yen strength and a narrowing yield gap with the US.
💼 US unemployment calms – weekly jobless claims fell to 233K, easing market fears after last week’s surprise spike to 250k caused panic.
🍎 Buffett sells Apple – the AI sell-off worsened after Berkshire Hathaway halved its huge Apple stake.
⬆️ Chinese inflation bump – China’s inflation rate rose to 0.5% in July, beating expectations and hinting at a rebound in consumer demand.
🤞 Harris picks Walz – Democrats hope Minnesota Governor Walz’s pro-labour, military and agricultural record will draw-in votes as the US presidency race tightens.
What does that mean for me and my clients?
Monday was a tough day for global equity markets, with significant falls driven by last week’s poor US labour data, tech weakness and Japanese currency and policy shifts. Some losses were pared-back later in the week, but investors were left unsure whether the worst was over.
While growth-style equities in particular suffered, it wasn’t bad news for all asset classes. Bonds initially rallied on a flight to quality and increased US interest rate cut expectations.
In times like these, maintaining a well-diversified portfolio is crucial. Diversification across regions and asset classes can help cushion against the unpredictable nature of the market and shifting trends.
Chart of the week
Source: The Week in Charts - Charlie Bilello, August 2024
Why’s this worth sharing?
Our chart of the week highlights a significant spike in the VIX Volatility index, often dubbed the ‘fear index’ as it reflects investor expectations of US market volatility, which reached levels not seen since the start of the Covid pandemic in 2020. The surge reflects the recent panic and turbulence across global equity markets, leading to steep short-term losses and a wave of aggressive stock selling from retail investors.
As panic cooled, the VIX returned closer to historical averages, and equity markets regained ground. This is something that would have been missed from reactive selling on the day, and highlights the need to stay calm, not rush decision-making and focus on the longer-term.
The Markets
US volatility – weak labour-market data and AI valuation worries sparked a US stock sell-off, but markets rebounded later in the week, helped by Thursday’s more encouraging unemployment data.
UK stumbles – UK markets took a hit, dragged down by recession risk from the US and broad falls across water utilities, banks and energy companies. Like the US, markets managed to partially recover as the week went on.
Asia fights back – despite heavy losses in the week, the Nikkei clawed back some ground by Thursday. Meanwhile tech-heavy markets in Korea and Taiwan rebounded after initially being hit hard by the spreading AI-rout.
Oil ends flat – after an initial losing streak, falling in tandem with equities, oil recovered as the US, Qatar and Egypt renewed calls for a cease fire in Gaza and China ramped up its jet fuel demands.
Big yield moves - bond yields plummeted early in the week amid market turmoil and growing recession concerns. However, with markets stabilising, US 10-year Treasury yields ended slightly up as Thursday’s unemployment data appeared more positive.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | -1.67% | 5.48% |
| FTSE 250 | -4.43% | 5.11% |
| S&P 500 | -1.07% | 12.15% |
| NASDAQ | -0.72% | 12.83% |
| Hang Seng | -0.78% | 0.62% |
| Nikkei 225 | -6.98% | 4.63% |
| Brent Crude | -0.57% | 4.22% |
| Gold Spot | -0.92% | 17.73% |
| UK 10yr GILT | -10bps | +38bps |
| US 10yr Treasury | +5bps | +6bps |
Source: FE FundInfo, figures as at close Thursday 8th August 2024.
This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
