Hopes of a September interest rate cut in the US provided a boost for global equity markets and drove up the Dow Jones Industrial Average Index to a new closing high.
- US corporate earnings provided a boost for investor sentiment
- Core US CPI reached a five-month high
- The Nikkei 225 Index hit a new record
US markets hit new highs: hopes of a September interest rate cut in the US provided a boost for global equity markets and drove up the Dow Jones Industrial Average Index to a new closing high. Federal Reserve chair Jerome Powell stoked expectations of a quarter-point cut next month during his speech at the annual Jackson Hole symposium, commenting: “The shifting balance of risks may warrant adjusting our policy stance.” Over August, the Dow Jones Industrial Average Index rose by 3.2%.
“The shifting balance of risks may warrant adjusting our policy stance” (Fed Chair Jerome Powell)
Core inflation hits a five-month high: alongside hopes of imminent monetary easing, stronger-than-expected corporate earnings provided a boost for sentiment and helped to offset persistent inflationary pressures and disappointing labour market data. Although the annualised rate of consumer price inflation remained at 2.7% in July, core inflation rose to 3.1%, its highest level for five months. Producer price inflation rose at a monthly rate of 0.9% in July, representing its largest monthly increase since June 2022, as the impact of President Trump’s tariffs started to take effect. Meanwhile, fewer-than-expected new jobs were created in July, and the figures for June and May were revised down.
Tariffs – and the impact of tariffs – are set to remain in the spotlight. The eurozone’s economy expanded at an annualised rate of 1.4% during the second quarter, representing a slight slowdown from first-quarter growth of 1.5%. President of the European Central Bank Christine Lagarde highlighted an “already evident” tariff-related slowdown in economic activity in the eurozone, which is expected to continue into the third quarter. Elsewhere, share prices in France dropped sharply towards the end of August against a backdrop of rising political turmoil. Over August as a whole, France’s CAC 40 Index declined by 0.9%, while Germany’s Dax Index fell by 0.7%.
Nikkei 225 breaches 43,000 points: in Japan, the Nikkei 225 Index hit a fresh all-time high in August, boosted by hopes of a US interest rate cut. The benchmark index rose by 5.5% during the month, breaching 43,000 points . Following July’s trade agreement between Japan and the US, Bank of Japan policymakers said they believe that the country’s economic growth may moderate in the short term, but expect growth to recover thereafter. Japan’s economy expanded at a quarterly rate of 0.3% during the second quarter, having grown by 0.1% in the first quarter.
