Equity markets continued to struggle last week with the dual impact of higher bond yields and increasing worries relating to the state of the Chinese economy weighing on investor sentiment. US benchmarks retreated for a third consecutive week, the S&P 500 falling by -2.1% with the technology centric NASDAQ faring modestly worse with a -2.6% decline. Part of the weakness reflected an uptick in US treasury yields with the closely monitored 10-year security reaching its highest level since October last year. That was largely the result of better than expected economic data, notably industrial production and retail sales which added to growing hopes that the US economy would avoid a recession despite the pace of the Federal Reserve’s (Fed) rate hiking cycle.

Elsewhere, stocks in the UK lagged their global peers with the FTSE 100 and FTSE 250 declining by -3.5% and -3.7% respectively. An acceleration in wages growth and an elevated core inflation figure were both notable headwinds to domestic performance. Gilt yields rose across the curve, particularly at the short end, reflective of further expected rate hikes on the horizon at the Bank of England (BoE). European equities also faced selling pressure, the MSCI Europe ex UK index slipping by -2.2%. In Asia, Chinese equities continued to lose ground with the Shanghai composite falling by -1.8% after a slew of disappointing economic releases including industrial production and unemployment. Japanese equities also endured a challenging week with the Nikkei 225 shedding -3.2%.

Moving to commodities, Brent Crude recorded its first weekly decline in two months, falling by -2.3% to $84.83 a barrel on those Chinese economic woes. Key industrial metal copper faced similar headwinds, especially regarding major issues in the Chinese property market which is a crucial consumer of the product. It fell by -0.5% to $8,232 a tonne. As for gold, the precious metal closed the week -1.3% lower at $1,892 an ounce having slipped to its lowest level for 5 months.

Week Ahead

Source: Refinitiv Workspace, 21/08/23

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