With the economy appearing resilient, this raised concerns that the Federal Reserve could keep interest rates higher for longer. This coming week will be the release of the latest inflation reading, with the September Fed meeting the following week. US Treasury yields ticked higher for the week, with the 10-year note ending at 4.257% compared to 4.173% a week earlier.
Rising yields pressured US stocks. In a holiday shortened week, the S&P 500 fell 1.3% and the Nasdaq declined 1.9%. Energy and utilities were the only two sectors of the S&P 500 to log gains for the week. The energy sector was supported by rising oil prices, with Brent crude settling above $90 a barrel, the first time since November. This came after Saudi Arabia and Russia extended their voluntary supply cuts to the end of the year. There was particular weakness in tech names, with Nvidia cooling off from its 2023 surge while Apple sank on news that Chinese government officials would no longer be allowed to use iPhones for work, reigniting Sino-US tech tensions.
In contrast to the US data, figures out of China disappointed. The Caixin Services PMI cooled more than expected while exports and imports remained weak. Against a weakening economic outlook, Chinese markets were lower for the week. The Shanghai Composite dropped 0.6% while the Hang Seng was down 1%, having to close on Friday due to a storm. The offshore yuan fell to its lowest level against the US dollar since its inception in 2010, while the onshore yuan dropped to a 16-year low. One small positive for the region was that troubled property developer Country Garden managed to secure an extension for a key debt payment deadline.
European markets also posted weekly declines amid concerns about the economy and the effect that higher interest rates were having. Second quarter eurozone GDP was downwardly revised to just 0.1%, while German industrial production dropped for a third consecutive month in July. The pan-European STOXX 600 was down 0.8%, while the UK FTSE 100 bucked the trend and managed to record a 0.2% gain. Bank of England governor Andrew Bailey suggested that the UK interest rate peak was near.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.
This document has been produced by the EFG Harris Allday research team utilising data from documents produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.