A month of mixed fortunes for markets

There was some positive news mixed in with areas of concern for the world’s major economies during
August – from a positive job report in the US to disappointing growth figures for China’s economy

Markets stuck to a familiar road in August, contemplating the next
move from major central banks in their efforts to tame inflation, but
at the same time spare their economies severe knock-on effects.
Investors reacted positively to a strong jobs report from the US.

The Nasdaq index gained ground early in August following the announcement, which showed a drop in the unemployment rate. Hopes of a less severe slowdown for the US economy were raised – bolstered by strong corporate earnings , although future earnings expectations look to be peaking (figure 1).

The news also strengthened speculation that the US Federal Reserve (Fed) could slow the pace of interest rate rises or even reverse course. However, markets dipped towards the end of August in the wake of central bankers warning investors to prepare for a  more sustained period of rate rises.

Another optimistic takeaway for the US was the pace of inflation in July, which slowed more than expected to an annual rate of 8.5%, down from 9.1% in June. The S&P 500 index and Nasdaq again both reacted positively to the news, as did markets in Europe, mirroring
hopes that inflation could be steadying in the US.