A Cautious Speech on Interest Rates by Fed Chair Caused Markets to Fall Flat

UK & Europe: Flash PMI disappoints

Flash PMI (Purchasing Manager Index) results were released last week which gave indications on the health of the European economies. 

German results were particularly disappointing, indicating a relatively stagnant business environment. 

The Bundesbank added to the low market sentiment for Germany, by announcing that they expected economic growth in Germany to remain stagnant for this quarter. 

After the previous two quarters of economic growth were in negative growth territory and moved Germany officially into a recession, this isn’t quite the optimism that the markets wanted. 

Meanwhile, UK business output was also shown to be at its lowest levels since January 2021, echoing the sentiment that the economy isn’t headed in the most optimistic direction. 

However, the shining light of the week came with a fall in natural gas prices. This helped to boost markets, bringing most major European indexes over the line just in the green. 

Americas: Powell’s interest rate caution

Markets spent most of last week awaiting a speech from Chair of the Fed, Jerome Powell, who was speaking at the Jackson Hole symposium on Friday. 

The meeting brings together central bankers and usually gives clear indications as to market sentiment and the direction of the economy for the remainder of the year. 

Powell’s speech came as no surprise, stating that inflation was still too high and central banks would still need to take a stance that likely involves further interest rate hikes to keep it under control. 

Retail reports from some big names including Macy’s, Abercrombie and Foot Locker showed a cautious outlook from consumers, as sales fell. 

Asia & Australasia: BRICS expansion

The BRICS nations met last week in Johannesburg, South Africa, to discuss expansion plans. The group, made up currently of Brazil, Russia, India, China and South Africa, announced plans to admit six new members, including Argentina, Iran and Saudi Arabia. 

There were also talks of a potential currency for the group, which may at some point add pressure to the global dominance of the US dollar. 

China, however, is struggling to reignite their economy back home, as markets last week slid into negative territory for another week. 

Evergrande, the troubled Chinese property company, reopened for trading on the Hong Kong Stock Exchange, with shares falling over 80% on their first day. 

They also announced further losses for the last quarter. Whilst the losses were nowhere near as bad as the previous quarter, it did little to reignite consumers' confidence in the company. 

Stock World: NVIDIA and Arm’s IPO

The chip company NVIDIA announced their profit earnings last week, which came in thankfully strong. 

Having grown a whopping 236% this year, NVIDIA, along with 6 others, has been responsible for the lion's share of the growth of the S&P 500 this year. They have also been a driving force in the AI investment sphere. 

As a result, markets were hotly awaiting the results, to ensure that the hype around AI has backing and that the strong growth can continue to be sustained into the last part of 2023. 

Arm, another chip maker, also announced their intention to file for IPO last week. This comes during a period where IPOs have been relatively stagnant for the last 18 months, due to market volatility. 

Many will be keenly watching the stock market’s reception of Arm’s IPO – the results of which may encourage or discourage companies from equally taking the IPO plunge.