Global News Update: 26 - 31 August 2024

United States:

- Economic Growth and Jobs:

  - Jerome Powell signalled readiness to cut interest rates in September, highlighting increased "downside risks" to the labour market. U.S. consumer confidence reached a six-month high in August, indicating more positive views on the economy and inflation.

  - The S&P 500 closed near its all-time high, marking a fourth consecutive monthly gain, driven by optimism about potential Fed rate cuts.

- Debt Securities:

  - U.S. Treasury yields rallied as investors anticipated more significant rate cuts. The dollar had its worst month of the year, reflecting bearish bets ahead of the Fed's rate decision in September.

- Inflation and Recession:

  - Powell's remarks at Jackson Hole emphasized the Fed's focus on preventing a significant economic slowdown while maintaining inflation control. The market's reaction included a drop in the VIX, with options traders hedging against potential volatility in September.

United Kingdom:

- Economic Growth and Jobs:

  - S&P PMI for August rose to 53.4, suggesting easing inflationary pressures and a potential 0.3% GDP growth in Q3. Chancellor Rachel Reeves indicated that the autumn Budget would be "painful," hinting at possible tax increases.

- Inflation:

  - BOE's Bailey expressed cautious optimism about inflation but stressed it was "too early to declare victory." The stock of homes for sale increased by 14% in July, signalling a recovery in the housing market.

Eurozone:

- Economic Growth:

  - ECB chief economist Philip Lane reported "good progress" in taming price pressures but maintained a cautious tone, emphasizing that interest rates would remain restrictive for now.

  - Germany's GDP contracted by 0.1% in Q2, with a significant drop in capital investment and private consumption, raising concerns about the country's economic recovery.

Japan:

- *Monetary Policy:*

  - BOJ Governor Kazuo Ueda reaffirmed his commitment to raising interest rates if inflation and economic growth remain on track. However, he acknowledged global market instability, contributing to a more cautious outlook.

China:

- *Trade and Economic Policy:*

  - China imposed export controls on crucial semiconductor materials, impacting global supply chains. The controls have raised concerns about potential shortages in Western production of advanced chips and military hardware.

Australia:

- Inflation:

  - Inflation rose 3.5% YoY in July, down from 3.8% in June. While this suggests some easing of price pressures, the pace is insufficient to warrant early interest-rate cuts. The Australian dollar edged up slightly while stocks extended losses.

New Zealand:

- *Jobs:*

  - Filled jobs continued to decline, with a 0.1% drop in July, marking the longest slump since early 2009. This trend reflects ongoing challenges in the labour market as the economy faces headwinds.

Artificial Intelligence (AI):

- Corporate Moves:

  - Nvidia's rivals, including Cerebras, d-Matrix, and Groq, mobilized to challenge the company's dominance in the AI chip market by raising funds and launching new products. These moves highlight the competitive dynamics in the rapidly growing AI sector.

Overall Market Sentiment:

- The end of August saw a surge in global stocks as traders anticipated potential Fed rate cuts in September. Despite this optimism, September is historically a challenging month for equities, especially in election years, with concerns about economic challenges persisting.