Written by Anthony Walters – Clever‘s Head of ESG & Christos Chountoulesis our Investment Analyst, the Market Review is packed with the most interesting and impactful events of the past week from the global financial markets.
Market Recap.
It was a challenging week for markets, amidst a backdrop of hawkish central banks, determined to reduce inflation and market concerns on the prospect of key property developers in China defaulting. The Nasdaq 100 ETF fell by -3.56%, followed by the FTSE 100 ETF (-3.11%), the S&P 500 ETF contracted by -2.59% whilst the Dow Jones Industrial Average ETF closed lower by -2.15 this week.
News.
China cut its one-year benchmark lending rate on Monday as authorities seek to ramp up efforts to stimulate credit demand, but surprised markets by keeping the five-year rate unchanged amid broader concerns about a rapidly weakening currency. The recovery in the world’s second-largest economy has lost steam due to a worsening property slump, weak consumer spending and tumbling credit growth, adding to the case for authorities to release more policy stimulus.
Geopolitics.
The BRICS group of major emerging economies – Brazil, Russia, India, China and South Africa – will hold its 15th heads of state and government summit in Johannesburg this week. China, seeking to boost its geopolitical might at a time of tensions with the United States, is looking to expand the bloc whilst Russia is embracing it as a way of overcoming isolation over the Ukraine war.
Inflation.
EU inflation increased by 5.3% in July versus 5.5% in June, extending a downtrend that started last autumn. Meanwhile price growth excluding food and energy, the underlying measure closely watched by the ECB, was flat at 5.5%, Eurostat said, confirming preliminary figures. Services inflation, however, picked up to 5.6% from 5.4%, a potential worry since services costs are heavily driven by wages and tend to be sticky.
Central Banks.
The Bank of England is under renewed pressure to raise interest rates next month after wages jumped more than expected in June, boosted by a one-off payment to NHS workers. Total pay, including bonuses, rose by 8.2% (7.3% forecast) a year in the three months to June, the Office for National Statistics reported. Pay (ex. Bonuses), rose by 7.8% in the quarter, the highest regular annual growth rate since comparable records began in 2001.
Commodities.
Default risk concerns over key property developers and shadow banks in China indicated slower recovery in the country and reduced overall demand for oil-derived commodities. Natural Gas fell by -6.93% this week, followed by Gasoline (-4.53%), WTI Crude Oil (-3.52%) and Brent Crude Oil (-2.99%).
ESG.
Google has joined the Amex and Shell sustainable aviation fuel (SAF) program, enabling companies to offset business travel emissions through SAF purchases, and supporting the scale-up of SAF production. The program utilises a book-and-claim model, enabling business travellers to pay for SAF and claim the environmental benefits, even if the SAF is not available at their departure airport.
Week Ahead.
Key releases this week include US housing market data such as Existing home sales (4.15M forecast/4.16M prior), Building permits (1.442M forecast, 1.441M prior) and New home Sales (706K forecast/ 697K prior). Markets will lock onto the Jackson Hole Symposium being held on 24th to 26th August and attended by central bankers, finance ministers, academics, and market participants from around the world. Fed Chair Powell speaks on Friday to guide markets further.
Sources.
Anthony Walters – Head of ESG, Christos Chountoulesis – Investment Analyst at Clever Adviser Technology Ltd (Clever)
Market recap – Data sourced from FE FundInfo, tradingeconomics.com & Koyfin. ETFs quoted: iShares Core FTSE 100 UCITS ETF, iShares Core S&P 500 UCITS ETF, iShares Nasdaq 100 UCITS ETF (quoted in Pounds Sterling).
News – China surprises with modest rate cut amid growing yuan risks, Reporting by Winni Zhou and Tom Westbrook, Reuters, 21/08/23
Inflation – Euro zone inflation fall confirmed, easing pressure on ECB to hike, By by Balazs Koranyi, 18/08/23
Central Banks – ECB to pause in September, say slim majority of economists: Reuters poll, by Wendell Roelf; Editing by Olivia Kumwenda-Mtambo and Alistair Bell, Reuters, 18/08/23
ESG – Google to Address Business Travel Emissions with Sustainable Aviation Fuel Purchases, by Mark Segal, ESG News, 16/08/23
Geopolitics – BRICS summit 2023: Dates, who’s attending and what’s on the agenda? by Wendell Roelf, 21/08/23
Commodities – Data sourced from Koyfin, tradingeconomics.com and Investing.com
Week ahead – Data sourced from Investing.com
Risk Warning: These are Anthony’s views at the time of writing and should not be construed as investment advice. The opinions expressed are correct at time of writing and may be subject to change. Capital is at risk. The value and income from investments can go down as well as up and are not guaranteed. An investor may get back significantly less than they invest. Past performance is not a reliable indicator of current or future performance and should not be the sole factor considered when selecting funds.
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