The S&P 500 endured its worst weekly return in 18 months as it declined -4.5% (price return in sterling terms), as worries about a US slowdown weighed on global indices. Notable misses on employment data, including the JOLTS Job Openings and Non-Farm Employment Change, fuelled concerns that tight monetary policy had pushed the labour market too far. Further disappointment came from the Institute of Supply Management’s survey of US manufacturing, with the August PMI of 47.2 remaining firmly in contraction territory.

From a sector perspective, information technology remained weak, and Nvidia led the market down, with its share price falling nearly 14% over the week, as a rumour that it is the subject of an antitrust investigation further fanned the flames. The energy sector was another notable laggard as demand fears caused the oil price to tumble, with Brent Crude ending the week down c.7%. On the other hand, defensive sectors, such as consumer staples and utilities, held their ground effectively. From a factor perspective, value stocks outperformed growth while small cap trailed large cap.

The picture wasn’t any better elsewhere, with markets in the UK, Europe, Japan and China all falling. The FTSE 100 posted a decline of -2.33% (price return in sterling terms), driven by prevailing sentiment rather than any UK specific data, while European indices, represented by the MSCI Europe ex UK index, fell -3.73%. Eurozone PMI data released during the week painted a similar picture to previous months, with manufacturing weak while services remained robust. German factory orders surprised to the upside, however industrial production undershot meaningfully.

In fixed income markets, the US 2s10s yield curve (the difference between the yield on a 10-year and a 2-year treasury) dis-inverted, meaning the 10-year now yields more. Yield curve inversion has historically signalled oncoming recession, with the dis-inversion a sign that bad times are imminent; many market participants have suggested that this time is different, given lower rates are off the back of disinflation, rather than to counteract a slowdown in growth.

Week Ahead

Source: Refinitiv Workspace, 09/09/24

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