Global Markets Weekly: European Inflation Nears Central Bank's Target |

Published: Saturday, August 31, 2024 · 3:14 AM | Updated: Saturday, August 31, 2024 · 3:14 AM

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This week’s global market update covers mixed U.S. stock performance, European inflation trends, Japan’s market recovery, and China’s economic challenges. Key highlights include U.S. economic data, European inflation nearing the ECB’s target, Japan’s stock market recovery, and China’s reduced growth forecasts.

United States

Stocks Performance: The major indexes ended mixed in a week of light trading ahead of the holiday weekend. The Nasdaq Composite fared the worst, dragged lower by chip giant NVIDIA, which lost nearly 10% of its value.
Growth and Inflation Data: The Labor Department’s core personal consumption expenditures (PCE) price index showed prices rising by 0.2% in July. Personal incomes increased by 0.3% in July, while personal spending rose by 0.5%. The Commerce Department revised upward its estimate of the annualized growth in GDP in the second quarter to 3.0%.
Housing Market: Pending home sales tumbled 5.5% in July, reaching their lowest level since 2001. Affordability challenges and expectations of lower mortgage rates were cited as reasons.
Bond Market: The yield on the 10-year U.S. Treasury note drifted higher. Futures markets continued to price in a certainty of a 25 basis points cut in interest rates.
Tax-Exempt Municipal Bonds: The market was active with multiple large new deals reaching the market. Conversely, the investment-grade corporate bond market was quiet.

Market Indexes Changes

DJIA: 41,563.08 (+388.00, +10.28% YTD)
S&P 500: 5,648.40 (+13.79, +18.42% YTD)
Nasdaq Composite: 17,713.63 (-164.17, +18.00% YTD)
S&P MidCap 400: 3,091.52 (-4.73, +11.14% YTD)
Russell 2000: 2,217.63 (-1.07, +9.40% YTD)

Europe

Stock Performance: The pan-European STOXX Europe 600 Index gained 1.34%. Germany’s DAX climbed 1.47%, Italy’s FTSE MIB added 2.15%, France’s CAC 40 Index rose 0.71%, and the UK’s FTSE 100 Index ended 0.59% higher.
Inflation: Headline annual inflation in the eurozone decelerated to 2.2% in August from 2.6% in July. Core inflation ticked down to 2.8% from 2.9%. Some ECB policymakers remained cautious about lowering borrowing costs.
Economic Sentiment: The economic sentiment indicator for the euro area rose to 96.6 in August. However, Germany’s business climate index dropped to 86.6, indicating growing pessimism among companies.
UK Housing Market: Net mortgage approvals in the UK rose to 61,985 in July. The Nationwide Building Society’s house price index rose an annual 2.4% in August.

Japan

Stock Market: The Nikkei 225 Index gained 0.7% and the TOPIX Index rose 1.0%. Both indexes recovered most of the ground lost earlier in the month.
Inflation: The Tokyo-area core consumer price index (CPI) rose 2.4% year on year in August. BoJ Governor Kazuo Ueda indicated the central bank might hike rates again if economic projections materialize.
Currency and Bonds: The yen weakened to the high end of the JPY 144 against the USD range. The yield on the 10-year Japanese government bond was broadly unchanged at about 0.9%.

China

Stock Performance: The Shanghai Composite Index lost 0.43%, while the blue chip CSI 300 fell 0.17%. In Hong Kong, the Hang Seng Index gained 2.14%.
Economic Forecasts: Economists reduced their 2024 growth forecasts due to a prolonged property sector slump and weak domestic demand. Retail sales are estimated to grow 4% this year, down from 4.5% in July.
Monetary Policy: The People’s Bank of China injected RMB 300 billion into the banking system via its medium-term lending facility and left the lending rate unchanged at 2.3%.

Other Key Markets

Hungary

Central Bank Policy: The National Bank of Hungary kept its main policy rate at 6.75%. Policymakers acknowledged that the country’s economic recovery stalled in the second quarter. They did not rule out future rate cuts depending on global central bank policies and domestic inflation outlook.

Brazil

Inflation: The Brazilian government reported that month-over-month inflation was measured at 0.19%, slightly above expectations. Core inflation and core services inflation have moved down in recent readings.