The latest economic news and market highlights from the UK, US and Asia.
Key takeaways:
📈 US GDP sends stocks higher – the US economy grew at a 3% annual pace over Q2, fuelled by strong consumer spending and business investment.
🎮 Nvidia earnings fail to meet market expectations – shares in Nvidia fell despite strong earnings beating prior guidance, as investors digest the prospect of a slower pace of growth for the chip maker.
🎈 German inflation reaches target – the European Central Bank could be set to cut interest rates again in September, with inflation in Germany falling to 2% in August, its lowest level in three years.
🏢 US jobless claims steady – the recent rise in US unemployment may be levelling off, with no meaningful growth in either initial or continuing jobless claims.
✂️ Fed signals September rate cut – Fed Chair Powell's dovish speech at the Jackson Hole Economic Symposium sent risk assets higher and the dollar lower, after he provided the clearest signal yet that the Fed is ready to cut rates in September.
What does that mean for you and your clients?
As we near the end of monetary tightening, we’re seeing slower, but persistent economic growth. If this continues, alongside easing financial conditions and a weaker dollar, we could see further appreciation in equities.
This is an attractive outlook for diversified investors. We may see a broadening of market returns after a period of dominance from a handful of major stocks. Investors flocked to these stocks when earnings grew rapidly, but as we’ve seen this week there’s been some pulling away in response to a cooling of pace.
The currency implications of a weaker US dollar will also help returns in other regions. This could generate some momentum if capital rotates into these markets.
Chart of the week
Source: Allianz Global Investors.
Why’s this worth sharing?
For the first time in years, the UK economy is expected to grow at a higher rate than the historic trend. At the same time, we’re seeing continued downward pressure on inflation.
It’s been a relatively good year so far for UK equities. They’ve broadly kept pace with global equities, despite having little direct exposure to the AI trend. A backdrop of cooling inflation, rate cuts, and momentum in the economy bodes well for UK stocks, which offer a different source of returns at a time when the outlook for AI stocks is being questioned.
The Markets
Resilient US economy: Yields rose reflecting expectations of a measured path for interest rate cuts, after the GDP and jobless data pointed to a continuation of economic growth in the US.
Nvidia chips away at US index returns: Most sectors on the S&P 500 closed Thursday on a positive note. However, information technology and consumer staples pulled the index down. Nvidia fell around 6.4% in dollar terms, weighing on the S&P 500 and the Nasdaq.
FTSE 100 momentum: UK stocks are set to end August with a second straight monthly advance and third consecutive weekly gain. This follows a topsy-turvy week, with banking stocks in particular showing volatility in response to interest rate expectations and tax fears ahead of the October Budget.
China confidence: The Hang Seng and mainland China equities rallied this week, with real estate and tech stocks leading the way.
Oil supply squeeze: Brent Crude prices ticked up this week, as plans to lower output in Iraq and supply disruptions in Libya raised concerns of a tightening market.
| | Weekly Change | YtD Change |
|---|---|---|
| FTSE 100 | 0.71% | 11.61% |
| FTSE 250 | -0.66% | 9.35% |
| S&P 500 | -0.49% | 14.33% |
| NASDAQ | -1.59% | 11.88% |
| Hang Seng | 1.30% | 4.80% |
| Nikkei 225 | 0.10% | 7.71% |
| Brent Crude | 0.20% | -0.93% |
| Gold Spot | 0.27% | 17.70% |
| UK 10yr GILT | +11bps | +48bps |
| US 10yr Treasury | +7bps | No change |
Source: FE FundInfo, figures as at close Thursday 29th 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.