August was a down month for stock-markets but two emerging themes helped equities cap losses. One is the belief that AI will help drive future growth and the other is the increasing optimism over a soft-landing for the US economy.
There have been indications that the US labour market has been weakening recently (remember that the markets are in a bad-news-is-good-news mode). Data last week showed that Job Openings fell to their lowest level since March 2001 and Friday’s nonfarm payrolls report, although above expectations in terms of jobs created, came in lower than the average for the year. Also, unemployment moved higher to 3.8%, its highest rate since February last year. If these trends were to continue it would provide the Fed with some evidence for a pause in their tightening policy. Were that to happen both bond and equity markets would likely give a positive reaction.
Of course, the Fed’s ultimate aim is to get inflation back to target and other factors come into play, including oil. The price of oil has been moving higher recently and needs to be watched, especially in light of Fed Chairman Powell’s recent Jackson Hole reiteration that “we are prepared to raise rates further if appropriate”. Oil traded this morning (Monday) at its highest level since November.
China added extra stimulus in an attempt to help its stock-market, lowering the required deposit levels for margin and cutting back stamp-duty. In the longer-term we will have to wait and see if these measures help boost consumer sentiment and ease concerns over the country’s growth outlook.
UK Market Chart 1st September 2023
US Market Chart 1st September 2023
US Risk Barometer 1st September 2023
Europe Risk Barometer 1st September 2023
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