Markets Keep Their Cool Over Summer Break
After a chill stint across the holidays, the world’s equity markets were surprisingly kinder than some headline‑grabbing events might have suggested.
Equities – A Gentle Slide
- Global stocks slipped a touch last week, but had a modest uptick the week before.
- In sterling, UK and US shares grew about 0.5% over the past two weeks.
- Europe, Japan and emerging markets were all down roughly 0.5%.
Bonds Remain Flat
- US Treasury yields eased slightly; UK gilts nudged in the opposite direction.
- Overall, bond returns barely shifted – a quiet two‑week rhythm.
Gold’s Unexpected Bounce
Gold broke out, climbing 3% to somewhere around $3,480, echoing a brief high from April.
Federal Reserve: Still Center Stage
Chair Jerome Powell, at the Jackson Hole summit, signalled support for a possible rate cut later this month, citing a softening labor market that might offset inflation risks linked to Trump’s tariffs.
Market consensus had pinned a 0.25% cut for September 17, and Powell’s comments only solidify those expectations. Recent US data—an impressive 3.3% annualized growth rate in the second quarter (but only 1.9% when trimmed for seasonality)—didn’t shake the odds. Core inflation edged up to 2.9% in July.
Outrage followed when President Trump abruptly removed Fed Governor Lisa Cook for alleged mortgage fraud. She’s challenging the move in court, with a taste‑of‑Supreme‑Court showdown looming.
Trump’s broader attempt to install appointees into the Fed—including the upcoming successor to Powell—has spurred speculation that US rates could fall sharply to about 3% by the end of next year, even if inflation is projected to creep above 3%.
Bonds Stay Calm Amid Politicising Chaos
10‑year Treasury yields, the barometer for investors everywhere, quietly slipped back to 4.2%—a full 0.6% below January’s peak—despite concerns over the Fed’s independence and possible inflation fallout.
Tariffs: A Sudden Turn
US wrestled with tariffs, especially the 50% tariff on Indian imports, in part to penalise Russian oil. A Monday court ruling flagged many of Trump’s tariffs as illegal, effective from October 14. The Supreme Court may side with Trump, but even a partial rollback could maintain most tariff effects under new legislation.
Nvidia’s Bumpy Quarter
Despite a robust 50% revenue jump and 59% earnings rise, Nvidia’s shares dipped 2% last week. The disappointment stems from uncertainty about China’s market, doubts about the longevity of the current boom, and the fact that the stock is already up 30% this year.
France’s Political Crossfire
Prime Minister François Bayrou, echoing his predecessor’s strategy, called a confidence vote on September 8 to salvage his budget deficit plan. A likely defeat could spell further political stalemate or a fresh parliamentary election—no dramatic market upheaval, but persistent uncertainty.
UK Government Undergoing a Shake‑Up
- Stacey—Starmer’s principal private secretary—was swapped, and the team at No 10 is in shuffle mode.
- Upcoming budget could see a range of new taxes: property, wealth, pensions, capital gains, and rental income.
- Potential tax hikes on banks have already nudged shares down 4%, though the specifics remain murky.
Looking Ahead
This week’s macro highlights will focus on US business confidence and payroll data, potentially nudging markets further.
