All eyes were on the US, particularly focussed on inflation data for the month of July. Signs that inflation may be peaking boosted confidence around the world. Political stability in Japan, rising Covid-cases in China, economic support for the cost-of-living crisis in Europe and a decline in economic activity in the UK all further influence markets during the week.
It was the Bank of England’s turn this week to raise interest rates aggressively, following aggressive hikes by the European Central Bank and the Federal Reserve in recent weeks. Strong jobs data coming out of the US suggests that central banks may have to continue their aggressive hikes. Tensions between US and China escalated last week weighing on investor sentiment.
Despite the Federal Reserve raising interest rates aggressively, global investor sentiment was boosted by the fact that in the face of a slowing economy, the Federal Reserve in the US could slow down its interest rate rises from here. The focus around the world stays on economic growth and/or contraction.
The US begins to see clear signs of a slowing economy and inflationary pressures beginning to fade, whilst the UK inflation continues to rise. The Japanese central bank bucks the trend and keeps interest rates low as the European Central Bank raises interest rates. Meanwhile, China faces a challenge in meeting its growth targets.
The US was rocked by high inflation, whilst the Chinese economy began showing signs of slowing down. Japan remains committed to supportive policies for its economy. Meanwhile recession fears intensify in Europe, but the UK economy unexpectedly grew in May. Markets continue to focus on inflation, economic growth (or lack of) and the direction and speed of interest rate rises.
Investor sentiment was boosted somewhat last week as slowing economic growth and signs that inflation could be peaking soon could mean that central banks tone down their approach to raising interest rates aggressively. Political news dominated last week, with Boris Johnson announcing his intention to resign as Prime Minister. Further afield, former prime minister of Japan, Shinzo Abe, was shot and killed while giving a campaign speech
After taking a breather in the previous week, markets returned to its losing streak, with pessimism centred around economic growth deteriorating and the impact that the actions of central banks around the world could have on tipping economies into a recession. Markets continue to be challenging, and we will of course keep you updated on our latest thoughts and give you our best assessment of what is going on in markets. You can access Omnis’ latest views at www.omnisinvestments.com