Economic Data Spurts Volatility In Global Equities

Economic data from the US didn’t seem to affect the outlook for the Federal Reserve to hold rates steady at its September policy meeting. Much of the data appeared to support the expectations for a soft landing plan in which inflation lowers to the Fed’s target without a serious recession. [EasyDNNnews:PaidContentStart]

In the past fortnight, the major equity indices concluded with a mixed performance. Value stocks took the lead as US benchmark West Texas Intermediate oil prices surged past USD 90 per barrel for the first time since November 2022. Large-Cap shares outperformed their smaller counterparts. 

Technology and growth stocks faced a setback following Apple's recent product launch event, which featured a price increase for its flagship iPhone 15. The products received mixed reviews, which appeared to cast a shadow over the technology sector's sentiment throughout the week. 

The eagerly awaited August consumer price index (CPI) data indicated progress in the Federal Reserve's battle against inflation. However, the rise in energy prices could prompt the central bank to consider further monetary policy tightening. While the headline CPI figures showed the most substantial monthly increase since August 2022, largely due to higher gasoline prices, the core CPI (excluding food and energy) increase exceeded expectations but was absorbed calmly by the markets. 

In terms of local currency, the pan-European STOXX Europe 600 Index concluded 1.60 per cent higher. This, followed the European Central Bank's decision to raise interest rates, coupled with signals that borrowing costs may have peaked. Improved economic data from China also contributed to bolstering investor sentiment. Germany's DAX rose by 0.94 per cent, France's CAC 40 Index gained 1.91 per cent, and Italy's FTSE MIB advanced by 2.35 per cent in the last week of September. The UK's FTSE 100 Index surged by 3.12 per cent, partly attributed to the depreciation of the UK pound against the US dollar, which benefited many multinational companies within the index. 

"The European Central Bank, in its 10th consecutive interest rate hike, hinted at a potential end to its monetary tightening drive. ECB President Christine Lagarde reported that a 'solid majority' of policymakers supported the quarter-point hike, elevating the key deposit rate to a record high of 4.0 per cent."

Industrial production in the eurozone weakened more than expected in July, dropping 1.1 per cent sequentially, primarily due to sharp declines in the output of durable consumer and capital goods. 

The UK economy contracted at a faster pace than anticipated in July, attributed to worker strikes, adverse weather conditions, and rising borrowing costs, as reported by the Office for National Statistics. GDP fell by 0.5 per cent sequentially, following a similar increase in June. Nonetheless, the rolling three-month growth rate increased by 0.2 per cent, driven by expansions in services, production, and construction. 

Japanese stock markets recorded gains in the past fortnight, with the Nikkei 225 Index rising by 2.8 per cent and the broader TOPIX Index up by 2.9 per cent. Positive Chinese economic data, combined with investor expectations of successful stimulus efforts in China, bolstered sentiment. 

Chinese equities displayed a mixed performance as official indicators suggested that the country's economy might have stabilised, although ongoing weakness in the property market was also evident. The Shanghai Composite Index remained relatively unchanged last week, while the blue-chip CSI 300 Index declined by 0.83 per cent. In Hong Kong, the benchmark Hang Seng Index slipped by 0.1%, accord. 

Official data for August provided evidence of economic stabilisation in China, with industrial production and retail sales surpassing expectations from the previous year. Additionally, unemployment unexpectedly decreased from July, although fixed asset investment growth fell short of forecasts due to a more significant decline in real estate investment.
 

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