The S&P 500 had experienced its worst weekly drop since March 2023, owing to economic growth concerns and potentially the September effect taking hold, however, it managed to see a weekly gain of 4% as investors tried to claw back losses. Tech stocks, which were amongst the most beaten up in the sell-off, saw some of the strongest performances, particularly Nvidia. Indeed, the tech-heavy Nasdaq was up almost 6% on the week.
The core consumer price index (CPI) rose 0.3% month-on-month (MoM) in August, slightly higher than expected, and the producer price index (PPI) also rose more than expected on a MoM basis. The inflation data seemed to back the case for the Federal Reserve to only cut interest rates by 25bps when it meets this week. On Wednesday, the CME FedWatch tool was pricing in just a 14% chance of a 50bps cut, however, on Friday, this had jumped to 47%, helping to support stock market gains, particularly the more rate sensitive small caps. The change in rate cut expectations came after former New York Fed President Bill Dudley said that there was a strong case for a 50bps cut. Treasury yields edged lower over the week, with the 10-year yield settling at 3.66%.
While the Fed’s next move is currently too close to call, one central bank decision that was widely expected was the European Central Bank cutting its deposit rate by 25bps to 3.5% on Thursday. Somewhat disappointing to markets though was that few clues were given on what to expect from future rate decisions. Nevertheless, European equity markets logged weekly gains, bouncing back from previous losses. For the week, the pan-European STOXX 600 added 1.9%, with regional indices also higher.
Equity performance in Japan was not as strong, with the Nikkei 225 only gaining 0.5% for the week while the Topix fell 1%, hurt by a strengthening yen against the dollar owing to the US inflation data. Thursday did see a brief pause in the yen’s ascent, allowing the Nikkei to snap a seven-session losing streak. In China the Shanghai Composite posted a weekly decline of 2.2% and Hong Kong’s Hang Seng fell 0.4%. Economic data was mixed, with China’s CPI rising less than expected in August and factory gate prices once again remaining in deflationary territory, while there was a slight boost in sentiment as exports rose by 8.7% year-on-year, which was higher than expected.
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.