Having experienced some sharp losses in recent weeks, global equities found some stability as the week progressed with US recession fears cooling somewhat. The S&P 500 had been within touching distance of a technical correction, defined as a drop of -10%, before news that the Institute for Supply Management (ISM) non-manufacturing index had risen back into expansionary territory, offering respite from a run of weak datapoints in the States.
The technology-heavy Nasdaq Composite was already deep into a correction with Artificial Intelligence valuations a concern, whilst the so-called carry trade, in which investors borrow at near-zero interest rates in Japan to invest in US growth assets, seemed to reach at peak. Japan’s heightened volatility, both equity market and currency, was to some extent eased by dovish comments from the Bank of Japan Deputy Governor who indicated the central bank would not raise interest rates when markets are unstable.
European markets bucked the trend with positive local currency returns whilst most other major indices closed the week in the red, albeit modestly. Germany saw improved industrial output and industrial orders data, ahead of expectations.
US 10-year yields briefly rose back above 4% on Thursday with speculation of an intra-meeting rate cut at the Federal Reserve subsiding. With rates falling in recent weeks, the average rate on a 30-year standard mortgage in the US fell to 6.47% this week according to Freddie Mac which is a 15-month low.
In commodities, the price of a barrel of Brent crude oil rose modestly, closing the week a shade under $80. European natural gas prices surged to their highest level this year due to resurfacing concerns over potential disruptions to Russian pipeline flows, whilst Cocoa prices also saw a large jump on rising supply fears from West Africa due to unfavourable weather conditions.
Week Ahead
| Day | Country | Measure | Period | Forecast | Previous |
| Monday | Japan | Bank holiday | - | - | - |
| Tuesday | UK | Average Earnings Index 3m/y | July | 4.60% | 5.70% |
| UK | Unemployment Rate | July | 4.50% | 4.40% | |
| US | PPI y/y | July | 2.30% | 2.60% | |
| Wednesday | UK | CPI y/y | July | 2.30% | 2.00% |
| EU | Flash GDP | Q2 | 1.70% | 0.70% | |
| US | CPI y/y | July | 3.00% | 3.00% | |
| US | Core CPI y/y | July | 3.20% | 3.30% | |
| Thursday | Japan | Prelim GDP | Q2 | 0.60% | -0.50% |
| China | Industrial Production y/y | July | 5.20% | 5.30% | |
| China | Retail Sales y/y | July | 2.00% | 2.60% | |
| UK | Prelim GDP q/q | Q2 | 0.60% | 0.70% | |
| US | Retail Sales m/m | July | 0.4% | 0.0% | |
| Friday | UK | Retail Sales m/m | July | 0.60% | -1.20% |
| US | Housing Starts m/m | July | -1.30% | 3.00% |
Source: Refinitiv Workspace, 12/08/24
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