US Equities Rise Amid Inflation Concerns, Small Cap Stocks Outperform
Market Summary
Last week, stock markets in the United States, Europe and Japan closed higher. Chinese stocks closed higher.
The US equity market experienced rise influenced by fear of inflation. Smaller –cap stocks performed well, narrowing the gap with large caps. Unexpected failing job openings and rise In unemployment rate indicates a softer labour market.
In Europe, the stocks market also peaked in hopes of peaking interest rates and a possible short-lived recession. The eurozone inflation remained high, but core inflation slowed slightly.
Chinese stocks also risen as government implemented stimulus to boost the economy. The property sector and shadow banking system persists but don’t post an immediate risk.
Turkey’s central bank has significantly increased its key interest rate for more orthodox monetary policy. While Brazil’s 2024 budget plan promises no deficit but may require new revenues, focusing on tax enforcement.
Major News
The US Unemployment has surged by 3.8% but US job growth improved, and wage growth slowed. US core personal consumption expenditure (PCE) price index has increased by 0.2% in July for the second consecutive month, signaling a temporary easing of price pressures. This boosts consumer spending, rising 0.6% inflation-adjusted consumer spending, strongest since the beginning of the year.
China’s PMI has returned to expansion in August rose to 51 from 49.2 in July. This figure has surpassed analysts’ expectations of 49.3 and marked the highest since February, suggesting the impact from efforts to boost economic growth.
What Caught Our Attention
India’s Inflation is hitting consumers hard, particularly from the fast-food outlets where cost-cutting is highly evident. Subway sandwiches no longer include free cheese slices, and McDonald’s and Burger King burgers go without tomatoes.
Influenced by the scorching heat, vegetable prices spike, with tomatoes seeing 1400% price increase in wholesale market. This drives the annual food inflation to 11.5% in July, pushing overall inflation to 7.4%, the highest in 15 months.
Source: Kredens Capital Management, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia
