US Employment Data and Chinese Stimulus Measures Propelled Markets out of an Abysmal August

UK & Europe: A Mixed Bag

It was a relatively muted week on European markets, with no huge economic data announcements to disrupt the waters. 

The FTSE 100 finished the week in the green on the back of news of China’s stimulus measures. 

On the index itself, food and clothing retailer M&S rejoined the FTSE 100, having been relegated in 2019. They’re now back in the index on the back of a year of bumper profit announcements. 

Germany didn’t fare quite so well, as their inverted bond yield curve hit lows not seen since 1992, garnering further negative attention on the state of their economy.  

The bond yield curve refers to the amount that government bonds are paying in coupons and generally when the curve on the graph has become inverted it has preceded a recession. 

UBS also published their first results since the Credit Suisse takeover, which were surprisingly positive. 

Meanwhile Danish Ørsted had less success with their announcement of potential losses causing the biggest fall in stock prices since first listing, whilst Swedish Klarna announced their first month-on-month profitability and could be looking at a future IPO. 

Americas: Goldilocks Inflation Levels

Core inflation data in the USA is at its lowest levels since late 2022, according to last week's update on figures.

Non-Farm Payrolls figures then followed up this indicator, revealing the state of the employment market, which showed a further rise in job creation levels, but a slowing from previous months. 

Unemployment was also shown to have hit an 18-month high, at 3.8%. 

This provides some optimism as a reduction in job creation and increase in unemployment reduces pressure on inflation, which might mean that it’s “just right” (hence the Goldilocks) to allow the Federal Reserve to pass on another month of hikes. 

Markets were positive on the back of the news, although this did little to raise the overall August outlook which was a negative month on the markets.

Asia & Australasia: China’s Rollercoaster

After another week of data showing China’s slowing economy, including falling manufacturing output, China finally announced stimulus measures for the economy. 

Measures include cut rates of foreign currency needed to be held by banks, as well as encouraging lenders to cut mortgage rates for both current and prospective borrowers. 

Confidence in markets was bolstered as a result, boosting both the domestic and international market sentiment for the week. 

Japan’s government also announced measures to help sky high gas prices, which further helped markets in the region. 

However, the Adani Group conglomerate in India faced further criticism as some news outlets reported that they may have manipulated markets with reports, adding pressure to the stock price as well as the Indian financial regulators. 

Stock World: Metals & Mining

Mining stocks have been driving gains across the FTSE and other European markets this week, as Chinese demand increased on the back of stimulus measures. 

Metal prices in general have been impressive this year, with many analysts predicting at the beginning of the year that silver could hit nine year highs in 2023. 

Often, both gold and silver move inversely to stock prices, as they represent a safe haven. 

This has been the case for most of the year. That being said, unusual pressures in August from high inflation and high bond yields has got some analysts worried about the longevity of the prices for the rest of the year.