Global stocks surged as investors shook off fears that the US was heading into a recession and the Federal Reserve chair confirmed rates were likely to be cut in September.
The Vix index traded as low as 15, having hit a four-year high of 65 earlier in August.
UK
The FTSE 100 gained 1.9% over the two weeks.
Bank of England governor Andrew Bailey said he was “cautiously optimistic” about inflation, but it was “too early to declare victory” after an extended period of elevated price rises.
The UK economy expanded 0.6% in the second quarter of 2024, a slight easing from the 0.7% growth rate recorded in the first quarter.
The S&P Global UK composite PMI rose to 53.4 in August from 52.8 in July, helped by easing price pressures. This marked the highest reading since April. The services PMI rose to a four-month high of 53.3 in August from 52.5 in July, while the manufacturing PMI rose to a 26-month high of 52.5.
UK inflation rose less than expected to 2.2% in July. Services inflation, the BoE’s key measure of domestic price pressures, declined more than expected from 5.7% in June to 5.2% in July, the lowest since June 2022.
UK average earnings slowed to 5.4% in the three months to June, the lowest rate in almost two years.
UK retail sales rose 0.5% in July, following a downwardly revised 0.9% decline in June.
US
The S&P 500 jumped 5.5% over the two weeks while the Nasdaq surged 7.0% as fears of a US recession faded.
Federal Reserve (Fed) chair Jay Powell used a speech in Jackson Hole, Wyoming, to signal that the Fed was likely to cut rates in September, declaring that “the time has come for policy to adjust” as he warned of rising “downside risks” to the labour market.
Minutes from the latest FOMC meeting showed that the “vast majority” of policymakers said “it would likely be appropriate to ease policy at the next meeting” if the economic data came in as expected.
The S&P Global US Composite PMI fell slightly to 54.1 in August, a four-month low, down from 54.3 in July. The service sector saw solid and increased expansion, while manufacturing output declined at its fastest rate in 14 months.
The Bureau of Labor Statistics reported that the number of jobs added to the US economy in the 12 months to March was likely to be revised down by 818,000.
US inflation fell to 2.9% in July, easing below 3% for the first time since March 2021 and bolstering the case for the Fed to cut interest rates at its next meeting in September.
US retail sales increased 1% in July, the most in 18 months and above forecasts of a 0.3% increase.
The University of Michigan consumer sentiment Index rose to 67.8 in August, up from an eight-month low of 66.4 in July.
Alphabet was hit by rumours that the Department of Justice was considering breaking up Google following a court ruling.
Europe
The Eurofirst 300 rallied 3.8% over the two weeks.
Minutes of the ECB’s July meeting showed officials had an “open mind” to cutting rates at their next policy meeting, despite concerns that inflation could be sticky. Sweden cut rates by 25bps to 3.5%and signalled another two or three additional rate cuts this year may be possible.
The HCOB Eurozone Composite PMI rose to 51.2 in August from 50.2 in the previous month, as the Paris Olympics boosted growth in France. However, the HCOB Germany Composite PMI dropped to 48.5 in August, down from July’s 49.1.
The ZEW Indicator of Economic Sentiment for the Eurozone fell 25.8 points to 17.9 — the biggest drop since the early months of the Covid-19 pandemic in April 2020.
Negotiated wages in Germany are expected to increase 5.6% in 2024, based on deals agreed between January and June, according to WSI, a trade union think-tank. The pay increase, in real terms, will be the fastest since their records began in 2000 and may jeopardise the European Central Bank’s ability to cut rates in September.
Japan
The Nikkei 225 rebounded 9.5% over the two weeks as Japanese stocks, which had borne the brunt of the sell-off in early August, recovered strongly.
Prime Minister Fumio Kishida announced that he was stepping down in September.
The au Jibun Bank Japan Composite PMI rose to 53.0 in August from a final 52.5 in July, pointing to the highest reading since May 2023.
Pacific Basin ex Japan
China’s industrial production rose 5.1% year on year in July, the slowest growth rate in four months.
Retail sales in China rose 2.7% in July, stronger than June’s increase of 2%.
Emerging Markets
The MSCI EM Index rallied 6.2% over the two weeks.
Bonds
The yield on the US 10-year Treasury closed at 3.81%, a decline of 13bps over the two weeks and nearing the lowest level in 14 months. Two-year yields fell 10 bps to close at 4.03%, an increase of 36 bps from their lows on 5 August.
The yield on the 10-year German Bund closed the two weeks unchanged at 2.23%.
China’s 10-year bond yield dipped briefly below 2.1% despite signals from the People’s Bank of China that bond yields are too low.
Commodities
Iron ore prices hit their lowest level in two years, having lost more than a third since the start of the year, as China’s stricken property sector depresses demand.
Gold touched a fresh all-time high, hitting $2,500 per troy ounce for the first time.
Currencies
The US Dollar index has now declined around 5% since the start of the third quarter.
