In a speech at the Jackson Hole summit of central bankers on Friday, Federal Reserve (Fed) Chairman Jerome Powell said the US central bank was prepared to raise rates further but also praised the strong economic conditions. Later in the day, European Central Bank (ECB) President Christine Lagarde echoed Powell’s words, saying the ECB will keep rates restrictive as long as necessary to reach its target of 2% inflation. Investors were already familiar with the underlying messages of both speeches and, consequently, neither speech surprised markets.
In Asia, stock markets were making solid gains on Monday bolstered by both the positive sentiment out of the US to end last week and efforts by the Chinese government to support markets. China cut a duty on stock trading in half as of Monday in a move intended to brighten sentiment for investors after a year of largely disappointing economic data. Hong Kong's Hang Seng Index was up 1.4% in early Monday trading, while the Shanghai Composite gained 1.9%. In Tokyo, the Nikkei 225 was trading up 1.7% and South Korea’s Kospi increased 0.7%. In Australia, the S&P/ASX 200 gained 0.6% after retails sales in the country shot up 0.5% compared with the previous month, beating market expectations.
In New York, stock indices finished last week strong, recovering most of Thursday’s losses, after an uneventful central bank symposium in Jackson Hole in the US state of Wyoming. The Dow Jones Industrial gained 0.7% Friday, finishing the week at 34,346.90 points and the S&P 500 gained 0.7% to close at 4405.71 points. The Nasdaq-100 increased 0.85% to end at 14,941.83 points.
In individual stocks, shares in indebted property developer China Evergrande fell by 87% when trading resumed Monday after a 17-month suspension. Evergrande is at the centre of troubles swirling around the Chinese real estate market where defaults have become commonplace over the last 2 years.
Watches of Switzerland shares also plummeted more than 20% on Friday after Swiss luxury watch manufacturer Rolex said it is planning to buy retailer Bucherer. Investors were concerned that the cooperation with Bucherer could put pressure on its retail peers such as Watches of Switzerland.
Macroeconomic data released at the end of last week confirmed the sustained weakness of Europe’s largest economy. German gross domestic product was flat in the second quarter, meaning the economy just barely managed to avoid a prolonged recession after contracting in the last quarter of 2022 and the first quarter of 2023. The ifo Business Climate Index released on Friday also showed a gloomy outlook for Germany. The indicator fell for the fourth month in a row to 85.7 points in August from 87.4 points in July. Future expectations among German business leaders in manufacturing were starkly pessimistic and the poor manufacturing performance was negatively impacting the logistics industry as well as trade.
Some brighter European economic data came out of Switzerland to finish off the week. The Federal Statistical Office said the total number of jobs in the economy increased by 2.2% in the second quarter of 2023 when compared with the same period a year earlier. However, the employment outlook indicator did decrease slightly (-1.1%).
Corporate news in focus: There is no major corporate news scheduled today.
Economic data in focus: Euro area M3 money supply (10:00 CET).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.