The latest economic news and market highlights from the UK, US and Asia.
Key takeaways
💥 US retail boom boosts market confidence – strong retail sales growth smashed expectations, easing recession fears and sparking a market surge.
❄️ Inflation cooldown in the US – inflation dropped below 3%, progressing further towards the Fed’s 2% target -could a rate cut be on the horizon for September?
📊 2.2% UK inflation below forecasts - inflation rose in July, but stayed below predictions, with the rise in wage growth slowing to 5.4%, the lowest level in two years.
📈 UK GDP on the rise - UK GDP grew by 0.6% in Q2, underpinned by strong growth in construction and industrial production.
🚀 The land of the rising economy – Japan’s GDP jumped by 0.8% over the quarter, exceeding expectations and signalling potential rate hikes in a surprising economic upswing.
What does that mean for you and your clients?
The recent volatility in markets, with the VIX hitting its highest levels since the pandemic, stems largely from uncertainty around the Federal Reserve’s ability to achieve a “soft landing” for the US economy. This means navigating slower but continued growth, rather than a “hard landing” that leads to recession.
Think of investors like passengers on a plane: each bump during descent makes the heart race, just as each fluctuation in economic data triggers anxiety among investors that a recession might be around the corner.
Whilst one swallow never makes a summer, this week’s data has been reassuringly positive, calming investors with markets reacting accordingly. The signs are pointing towards steadier growth rather than economic turmoil. It’s time to breathe a little easier, but stay vigilant as we navigate these final stages of uncertainty.
Chart of the week
Source: Jupiter Strategic Bond Fund, June 2024
Why’s this worth sharing?
In the majority of scenarios, fixed interest assets are set to deliver positive returns given the higher starting level where yields remain today. In the downside scenario for the economy, investors could expect double-digit returns which would offer meaningful diversification and protection if equities were to fall.
We saw a glimpse of the hard landing scenario play out earlier in the month, as equities fell in response to the unwinding of the Yen carry trade and weaker US data. Bonds rallied over this period, providing the diversification against equities that investors have relied upon over the years.
The Markets
S&P recovery: Global markets have generally rallied after last week’s sell-off, with the S&P regaining enough to recover all of the losses seen this month. Walmart raised its annual profit forecast for the second time this year, sending shares in the retail giant higher.
FTSE shines: Energy and commodity stocks gained in response to increasing concerns of conflict in the Middle East. Buoyed by the broader global recovery in risk assets, the FTSE is set for its best week of returns since May.
Hang Seng hangs lower: Weak China data outweighed rate cut optimism before Thursday’s close, however a strong profit beat this morning from JD.com has fuelled a market rebound.
Keep calm and carry on Nikkei: Japanese stocks pushed higher, overcoming carry trade jitters, thanks to impressive GDP growth.
Crude concerns: Brent Crude spiked on potential retaliation from Iran but eased off as tensions calmed.
Gold loses ground: The value of the precious metal pulled back slightly amid improved economic sentiment.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 2.52% | 11.04% |
| FTSE 250 | 2.42% | 9.46% |
| S&P 500 | 3.03% | 15.97% |
| NASDAQ | 4.55% | 15.47% |
| Hang Seng | -0.43% | 3.17% |
| Nikkei 225 | 2.41% | 2.97% |
| Brent Crude | 0.60% | 4.06% |
| Gold Spot | -0.30% | 17.47% |
| UK 10yr GILT | -2bps | +39bps |
| US 10yr Treasury | -2bps | +5bps |
Source: FE FundInfo, figures as at close Thursday 15th August 2024.
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