In a holiday shortened week, the S&P 500 lost 4.3%, its worst performance since March 2023. The Dow Jones Industrial Average dropped 2.9% while the tech-heavy Nasdaq Composite fell 5.8% in its biggest weekly drop since January 2022. Defensive sectors like utilities and consumer staples were the best performers while energy stocks were amongst the worst performers, hurt by a slide in oil prices. Another sector seeing notable losses was information technology. A slump in artificial intelligence (AI) darling Nvidia weighed on the sector, with concerns around a potential antitrust investigation, as well as ongoing worries about AI demand following its earnings the prior week.
There were a number of economic data releases although they did little to boost sentiment. ISM’s manufacturing Purchasing Managers’ Index (PMI) came in at 47.2 in August, up from July’s 46.8 but remained in contractionary territory for a fifth consecutive month, with new orders down for a third month. Friday saw the release of the much anticipated jobs report, with figures from the Labor Department revealing that the US economy added 142,000 jobs last month, slightly lower than expectations. Meanwhile the unemployment rate edged lower to 4.2%, with the mixed report reducing odds of a 50 basis point rate cut from the Federal Reserve this month, with markets gearing up for a 25bps cut. Across the week Treasury yields drifted lower, with the 10-year note ending at 3.71%, its lowest level since May 2023.
European equities also experienced a negative start to September, amid economic growth concerns and caution around monetary policy. The pan-European STOXX 600 closed each of the five sessions lower, ending down 3.5% to snap a four-week winning streak. Most sectors were lower although the real estate sector managed to hit its highest level since August 2022. Regional indices also retreated, with Germany’s DAX down 3.2% as industrial production in July fell by a worse-than-expected 2.4%, overshadowing earlier data showing that manufacturing orders unexpectedly ticked 2.9% higher. Attention will be on this week’s European Central Bank meeting, where it is expected to cut rates by 25bps.
Markets in Japan also experienced steep losses, with the Nikkei 225 losing 5.8%, hurt by weakness in semiconductors as well as a stronger yen. The downtrend continued in China, with the Shanghai Composite losing 2.7% with mixed economic data. While the official manufacturing PMI remained in contraction in August, falling to 49.1 from 49.4, the private Caixin reading rose back into expansion, at 50.4. In Latin America, markets saw slight losses, with Argentina’s Merval ending marginally higher. Brazil’s second quarter GDP came in stronger-than-expected, boosting expectations that the central bank may hike its interest rate to dampen inflation. Chile’s IPSA index fell 3.4%, even with its central bank cutting interest rates by 25bps to 5.50% as expected. Latam currencies were mostly lower as commodity prices dropped on demand concerns.
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.