The dip had been attributed to a weaker-than-expected jobs report which raised questions over whether the Federal Reserve (Fed) has been too slow off the mark for rate cuts and may be forced to be more aggressive than previously anticipated, however a string of upbeat data releases for the week helped to allay the fear of deeper cuts. There was much focus on the inflation readings, with the producer price index rising by less than expected in July, at 0.1% month-on-month and services prices saw their biggest decline since March 2023 and then the consumer price index cooled. In addition, there was support from retail sales numbers and jobless claims calming recession fears.
For the week, the S&P 500 added 3.9%, the Dow Jones up 2.9% and the tech-heavy Nasdaq climbed 5.3%. Tech was one of the strongest sectors, particularly thanks to Nvidia which was up nearly 19% as it continued to bounce back. The consumer discretionary sector was also notably strong, helped by Walmart’s upbeat earnings results while Starbucks surged on the announcement of its new CEO. Although the yield on the 10-year Treasury note jumped higher on Thursday after the strong retail data, it had been trending lower for most the week and managed to end at 3.89% compared to 3.94% the previous week. Attention will be paid to Fed chairman Jerome Powell’s speech at this week’s Jackson Hole conference for any policy clues.
The paring back of US recession concerns also carried across to European markets. The pan-European STOXX 600 rose 2.5% for the week, seeing its best performance since early May. Similar to the US, the tech sector was a strong performer, logging its longest winning streak in around six months. The eurozone economy expanded 0.3% in the second quarter, matching the pace of the first. In the UK, gross domestic product (GDP) was up 0.6% for the same period, remaining resilient after the technical recession in the second half of 2023.
China’s economic rebound looked less rosy however, with industrial production and fixed asset investment missing expectations. On the bright side retail sales saw a better-than-expected increase and despite the mixed picture Chinese equities saw slight gains for the week. The Shanghai Composite was up 0.6% while the Hang Seng added around 2%. It was a holiday shortened week for Japanese markets however, that did not stop the Nikkei 225 from surging 8.7%, with volatility around the Bank of Japan’s July hike stabilising. There was support from a weakening yen as well Japan’s GDP growing by an above expectation 0.8% quarter-on-quarter.
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.