Weekly Market Update - winds of change

The latest economic news and market highlights from the UK, US and Asia.

Key takeaways:

⚠️ Escalation in the Middle East – Iranian missile attacks on Israel, following a ground invasion of Lebanon, triggered a risk-off swing in global markets.

🌪️ US floods – Hurricane Helene caused widespread destruction across six US states, resulting in over 200 deaths and over $100bn in estimated damages.

💷 UK economy expands – GDP came in a touch lower than expected in Q2 at 0.5%, with business investment rising for the third consecutive quarter.

📉 European inflation plummets – Concerns over a slowdown in the European economy increased after both France and Spain saw inflation fall below 2% for the first time in three years.

💼 US job openings rise - US employers posted 8 million vacancies in August, an unexpected rebound from July’s decline. However, the number of Americans quitting their jobs — a sign of confidence in their job prospects — slid to the lowest level since August 2020.

Idiosyncratic risks can arise at any time, and over shorter time frames, always present a threat to returns. The risk of wider conflict and disruptions to the production and supply of oil has sent this commodity sharply higher, and unsettled equity markets.

In moments like these, the value of diversification is clear – both in asset class and regional allocation, with Chinese equities immune to the worries this week, continuing their sharp recovery.

The geopolitical concerns are serious, and the human cost and suffering is enormous. We can never be too cautious against an escalation in conflict; however, we should be thankful that more often than not our worst fears aren’t realised.

If we take a clear-headed view and look past the terrible consequences of war, we can see another week of data pointing to a robust economy.

Chart of the week 

Source: OECD Economic Outlook, Interim Report, September 2024

Global inflation rates are nearing central banks’ targets, indicating that the era of high interest rates might soon ease. The shift could increase global liquidity, providing support for economies and boost markets. Whilst there are always new problems to worry about, investors will welcome the vanquishing of inflation after a tough couple of years.

Nervous times: US stocks hit a two-week low in dollar terms, as investors grew cautious ahead of Friday’s payroll report and due to escalating concerns over Middle East tensions. The risk-off move strengthened the dollar, which in turn has boosted US market returns for sterling investors.

No man is an island: UK stocks also fell in response to the heightened geopolitical tensions, with the FTSE 100 somewhat supported by upside for the energy giants. 

All the tea in China: Defying global trends, Chinese stocks extended their rally from last week’s stimulus announcements. The market optimism coincides with the October Golden Week - a national holiday period which usually sees increased tourism and economic activity.

Safe haven: Gold’s run continued, after attacks between Iran and Israel sparked a flight to safety.

Oil escalation: Crude prices spiked this week over concerns Israel could attack Iran’s oil production facilities, which may trigger retaliatory action and wider disruption of supply.

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.