US stocks and bonds were buoyed by growing speculation that the US Federal Reserve may cut rates by 50 bps at its September meeting.
UK
The FTSE 100 fell 1.2% over the two weeks.
The UK economy flatlined for a second consecutive month in July. However, retail sales rose by an annual rate of 1% in August, up from 0.5% the previous month.
US
The S&P 500 rose 0.4% over the two weeks while the Nasdaq rallied 1.0%.
The consumer staples sector has outperformed in recent weeks as investors favour more defensive areas of the market amid concerns over a potential slowdown in the US economy.
US inflation was weaker than expected in August, falling to 2.5% from 2.9% in July. Core inflation held steady at 3.2%.
Non-farm payrolls rose by a less-than-forecast 142,000 in August, while July’s increase was revised down to 89,000. The unemployment rate dropped to 4.2%.
The University of Michigan’s US consumer sentiment index rose to a stronger-than-expected 69.0 in September, the highest level since May, while year-ahead inflation expectations fell to the lowest level since December 2020.
The Federal Reserve cut a proposed increase to capital requirements for the largest US banks by more than half after a backlash from the industry and politicians.
The Bank of Canada governor signalled policymakers could switch to 50-bps rate cuts should growth disappoint.
Europe
The Eurofirst 300 lost 2% over the two weeks.
In a unanimous decision, the European Central Bank lowered rates by 25 bps to 3.5%. President Christine Lagarde signalled more rate cuts were expected but downplayed the likelihood of one at its next meeting in October.
Political party Alternative for Germany won a regional election in Germany, the first time a far-right party has secured such a victory in the country’s postwar history.
Veteran politician Michel Barnier was named as France’s new prime minister.
Italian lender UniCredit announced it had built a 9% stake in Germany’s Commerzbank, opening the door for a potential takeover bid.
Japan
The Nikkei 225 dropped 5.3% over the two weeks.
Pacific Basin ex Japan
China’s consumer price index rose 0.6% in August from a year earlier, up from 0.5% in July. Core inflation increased 0.3%, slowing from July’s 0.4% rise, and the lowest level in over three years.
In China, industrial output rose 4.5% year on year, the slowest rate of increase since March, while retail sales rose 2.1% against a year earlier, their second slowest monthly increase this year. Fixed asset investment grew 3.4% between January and August, the slowest pace this year.
The value of Chinese’s new home sales by the country’s top 100 developers fell 26.8% in August year on year, accelerating from a 19.7% drop in July, according to the China Real Estate Information Corp.
South Korea’s “Corporate Value-up” initiative appears to have stalled, with just 1% of South Korea’s 2,600 listed companies having signed up or committed to signing up to the programme since it was announced in February.
Emerging Markets
The MSCI EM Index declined 1.7% over the two weeks.
Turkey’s GDP increased at an annual rate of 2.5% in the second quarter, the slowest pace since the pandemic.
Bonds
The yield on the 10-year US Treasury closed the two weeks down 22 bps at 3.66%. With the 2-year bond yield dropping 32 bps at 3.59%, the US yield curve became positively slopped once more. The rally was prompted by senior US policymakers suggesting there was room for multiple rates cuts in 2024 if the data warranted.
The yield on the 10-year German Bund fell 15 bps to 3.15%.
Commodities
Brent crude fell below $70 for the first time since December 2021 as investors grow increasingly nervous about the impact of a slowdown in the world’s largest economies on the demand for crude.
Gold hit a fresh high of $2,555 an ounce.
