It was a challenging week for financial markets with many sectors ending the week in the red. While the local market was marginally lower, global equities and REITs struggled. Global equities were hit by the selloff in tech, which saw the NASDAQ Index down -3.6% while the S&P500 Index (-1.9%) was also weaker. In addition, Asian markets were also lower as the selloff in the US impacted both the tech heavy Korean (-1.1%) and Taiwanese markets (-0.6%). The Chinese (-2.5%) and Hong Kong (-3.5%) indices were also lower, while the Japanese Nikkei had the sharpest decline, down -4.9%, and pushing lower from its all-time high reached in mid-July.
The weakness in the Chinese economy saw the PBOC cut rates by 0.5% (to 10.0%). This week sees the release of PMI data with expectations that the manufacturing sector continues to decline while the service side of the economy remains flat. Overall, the growth outlook in China remains a drag on global growth with industrial metal prices (i.e. copper, aluminium) retreating as demand remains weak and inventory levels continue to rise.
It’s a big week on the data front. Domestically all eyes will be on the 2q24 CPI print (f’cst 3.8% y/y, +0.2% pcp/f’cst 1.0% q/q, flat pcp), which is expected to be marginally higher from 1q24. Retail sales (f’cst 0.2%, -0.4% pcp) along with private sector credit and building approvals for June will also provide details on the strength of the local economy. The CPI reading reading will be critical as to the next move by the RBA, but we continue to see no change in the policy front.
The local FY24 reporting season kicks off, while in the US the earnings season continues with around 40% of the S&P500 Index reporting this week led by Microsoft, Amazon and Apple. With the tech sector having been sold off recently, the results from these companies are likely to shape the performance of equity markets in the near term. In addition, there is plenty of economic data led by the US Fed FOMC meeting (f’cst no chg), along with jobs (Un f’cst 4.1%, no chng), payrolls, PMI and ISM data. In Europe, 2q24 GDP (f’cst 0.5% y/y, +0.1% pcp) and preliminary July CPI data (f’cst 2.8%, -0.1%) will set the tone for the next move by the ECB, which we expect to see cut cash rates into the northern spring. So a big week for markets that is likely to see volatility remain high.
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