Take Two: Global stocks volatile on growth fears; Eurozone GDP revised down
- 09 September 2024 (3 min read)
What do you need to know?
Global stocks endured a fresh bout of volatility last week, driven by concerns over weak US economic data and investors cooling towards what has been the market leading technology sector. Survey numbers from both S&P and the Institute for Supply Management highlighted that US manufacturing activity continued to contract in August. The S&P 500 index fell 2.1% and the technology-heavy Nasdaq lost 3.3% on Tuesday, though they remain up by 16% and 15% respectively year to date. While Asian and European indices also saw falls, they also remain in positive year-to-date territory1 .
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Around the world
Eurozone GDP grew 0.2% on a quarterly basis in the second quarter (Q2), revised down from the earlier estimate of 0.3% and compared to a 0.3% rise in Q1. Meanwhile, Eurozone business activity expanded for a sixth consecutive month in August, with France - the host of the 2024 Olympic Games - providing a major boost. The HCOB composite Purchasing Managers’ Index, which includes both manufacturing and services, rose to 51.0 in August from 50.2 in July – a slight downward revision from the earlier estimate of 51.2. A reading above 50 indicates growth.
Figure in focus: 4.25%
The Bank of Canada (BoC) lowered interest rates by 25 basis points - its third successive cut - leaving its benchmark rate at 4.25%, in line with market expectations. BoC Governor Tiff Macklem said that if inflation continues to fall then it is “reasonable to expect further cuts” in the policy rate. The rate adjustment comes amid economic challenges including rising unemployment and high housing costs. AXA IM forecasts two further rate cuts, taking the benchmark to 3.75% by end-2024, then envisages the BoC slowing the pace of cuts in 2025.
Words of wisdom
Deglobalisation: A move away from inter-dependency between nations, with a reduction in the flow of trade, technology and investment across borders. The coronavirus pandemic is thought to have interrupted the globalisation trend, by restricting the movement of goods and people and making countries more reliant on – and protective of – their own capabilities. Some commentators have highlighted the headwinds facing globalisation currently, including trade distribution, national security, economic security, industrial policy and climate change.
What’s coming up?
Japan reports the final estimate of Q2 GDP growth on Monday when China issues its latest inflation data. On Tuesday the UK publishes employment figures covering July and follows up with July GDP data on Wednesday. On the same day, the US issues its latest inflation numbers while on Thursday markets will be paying close attention to the European Central Bank as its policymakers meet to decide on interest rates. France reports inflation data on Friday.
Disclaimer
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