Global markets trended lower this week. The European and Asian markets trended up but were overshadowed by a worrying fall in the S&P index and Nasdaq. The Russell 2000 index rose as the small cap stocks continued to outperform their large cap counterparts. Fed Chair Jerome Powell indicated rate cuts are imminent to ward off cooling in the job markets, while inflation is within acceptable bounds. Positive U.S. economic data on GDP growth and core PCE inflation has increased the likelihood of a 25 bps rate cut by the Fed. Fears of oil supply disruptions resurged and oil prices increased.

Global Updates
  • The MSCI All Country World Index inched lower this week pressured by the fall of Nvidia’s stock. 
  •  The U.S. core PCE inflation slowed to 2.8% in the second quarter lower than the expected 2.9%. Core PCE inflation was 3.7% in the first quarter of 2024. 
  • Fed chair Jerome Powell signaled a September rate cut is highly probable in his Jackson Hole address. He suggested the 2% target inflation rate is achievable, citing the controlled decline in inflation in the past months. The markets are pricing in 100 basis points in rate cuts by the year’s end.
  • Germany’s Ifo Institute’s business-climate index fell to 86.6 in August from 87 in July indicating decreasing optimism in German companies amid four consecutive months of contraction in manufacturing by German industries.
  • Brent crude prices rose driven by the reemergence of conflicts in the Middle East with expected higher oil demand from a resurgent U.S. economy and cessation of oil production in Libya.
  • The People’s Bank of China is planning to inject $42 billion into the Chinese financial system by keeping the interest rate of 2.3% for its one-year medium term lending facility unchanged and rolling over those loans.
  • Chinese giants BYD and Huawei reported higher profits despite falling consumer demand in China.
  • Canada announced it is rolling back pandemic era rules, which permitted employment of temporary foreign workers to bridge labor shortages.
U.S. Equity
  • The S&P 500 & Nadaq indices fell during the week. The Dow Jones index closed at a record high this week following the release of encouraging U.S. economic data by the commerce department. 
  • The U.S. Commerce department reported higher-than-expected economic growth, spurred by strong domestic consumption and revised lower inflation rate. The real GDP growth was revised up to 3% from 2.8% for the second quarter of 2024.
  • Nvidia’s stock dipped despite its record $30 billion quarterly earnings in line with forecasts and a strong sales outlook. Investors were disappointed due to the failed expectations of Nvidia beating forecasted revenues by a high margin, similar to previous quarters. 
  • CrowdStrike’s stock rose after its second quarter revenues beat the early revenue forecasts. The company lowered its annual revenue guidance due to the $60 million incentives offered to retain customers after a company update caused a global systems shutdown.
  • Dollar General’s earnings fell short of expectations and lowered its annual sales and profit forecasts. The company attributed its lower earnings to falling customer incomes, inventory damage and theft.
  • Apple and Nvidia are in fundraising discussions to invest in OpenAI for its next funding round.
  • Clothing giant Gap reported 5% increase in sales revenues to $3.72 billion exceeding the forecasted revenue of $3.63 billion. 
  • Edgar Bronfman exited the bidding process to purchase Paramount.
  • The National Labor Relations Board has rejected Amazon’s appeal against the unionization of its Staten Island warehouse workers.
  • Curt Calaway will replace John R. Tyson as CFO of Tyson Foods with immediate effect. Tyson Foods will also sell its 49% stake in the joint venture with Godrej in India.
Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index edged lower this week.
  • The U.S. 10-year Treasury yield rose to 3.865% and the yield on the 2-year note edged down to 3.90% over the week.
  • The U.S. Dollar Index recovered and rose to 101.3 this week following the upward revision of U.S. GDP data for the second quarter.
Sources

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