This week saw significant movements in global markets, driven by rate cuts from the European Central Bank (ECB) and anticipation of a rate cut from the Federal Reserve. U.S. stocks rebounded, European stocks gained, Japan faced mixed performance, and Chinese stocks declined. Key economic indicators and policy decisions shaped market sentiment across different regions.
United States
- Stocks Rebound After Sell-Off: U.S. stocks posted solid gains, recovering from the previous week’s steep losses. Growth stocks outpaced value shares, with technology stocks leading the way. NVIDIA's positive outlook on artificial intelligence was a significant contributor.
- Core Inflation Slightly Higher Than Expected: Core consumer inflation rose to 0.3% in August, slightly above expectations. Headline inflation showed an annual increase of 2.5%, the lowest since early 2021. The average rate for a 30-year, fixed-rate mortgage fell to 6.29%, the lowest since February 2023.
- Treasury Yields Reach Year-To-Date Lows: Treasury yields ticked lower, with the 10-year Treasury note trading at year-to-date lows. Tax-exempt municipal bond yields were little changed, and the investment-grade corporate bond market appeared quiet but healthy.
- Market Indexes Changes:
- DJIA: 41,393.78 (+1,048.37, +9.83% YTD)
- S&P 500: 5,626.02 (+217.60, +17.95% YTD)
- Nasdaq Composite: 17,683.98 (+993.15, +17.80% YTD)
- S&P MidCap 400: 3,034.34 (+94.93, +9.09% YTD)
- Russell 2000: 2,182.49 (+91.08, +7.67% YTD)
Europe
- Stocks Gain on ECB Rate Cut: The pan-European STOXX Europe 600 Index ended the week 1.85% higher. Germany’s DAX rose 2.17%, France’s CAC 40 gained 1.54%, Italy’s FTSE MIB added 0.83%, and the UK’s FTSE 100 increased 1.12%.
- ECB Cuts Rates Again: The ECB lowered its deposit rate by a quarter-point to 3.5%, amid signs of weakening economic growth and slowing inflation. The ECB remains cautious and is not committing to a specific rate path.
- UK GDP Stagnates; Pay Growth Eases: The UK economy was unchanged for a second consecutive month in July. Over the three months ended July 31, GDP expanded by 0.5%. Average earnings, excluding bonuses, increased 5.1% year-over-year for the three months through July, down from 5.4% in the previous period.
Japan
- Mixed Market Performance: The Nikkei 225 Index gained 0.5%, while the broader TOPIX Index fell 1.0%. The yen strengthened to the high end of the JPY 140 range against the USD.
- Policymakers’ Comments Point to Additional Rate Hikes: Expectations for further rate hikes by the Bank of Japan were supported by recent comments from central bank board members. Despite hawkish comments, the yield on the 10-year Japanese government bond fell to 0.84%.
- Revised GDP Growth and Inflation Data: Japan’s second-quarter GDP growth was revised lower to an annualized 2.9%. The consumer goods price index rose 2.5% year-on-year in August, slowing from the previous month’s 3.0%.
China
- Stocks Decline on Weak Inflation Data: The Shanghai Composite Index and the blue-chip CSI 300 fell 2.23%. The Hang Seng Index in Hong Kong gave up 0.43%.
- Inflation and Trade Data: China’s consumer price index rose 0.6% in August, while core inflation increased 0.3%. The producer price index fell 1.8% year-over-year. Exports exceeded forecasts, rising 8.7% in August, while imports expanded by 0.5%.
Other Key Markets
- Hungary: Inflation in August was 3.4%, lower than expected. Despite lower inflation, recent negative fiscal news and currency weakness may discourage the National Bank of Hungary from reducing rates at a faster pace.
- Czech Republic: Inflation in August was 2.2%, matching the July reading but higher than expected. The central bank is likely to continue cutting interest rates incrementally due to economic weakness.
