Take Two: Fed signals potential rate cut in September; gold price hits record high
- 26 August 2024 (3 min read)
What do you need to know?
The Federal Reserve is “likely” to cut interest rates in September, its latest meeting minutes showed. The “vast majority” of its committee felt if inflation continues to slow as expected, “it would likely be appropriate to ease policy at the next meeting.” Several policymakers had considered easing in July but the decision to keep rates on hold was unanimous. Separately, the US Labor Department said 818,000 fewer new jobs were created between March 2023 and March 2024 than originally reported, the largest downward revision since 2009. The data added to expectations for a rate cut. Elsewhere, minutes of the European Central Bank’s last meeting said policymakers would approach the September rate decision “with an open mind”.
Around the world
Eurozone inflation was confirmed at 2.6% in July, matching the previous estimate and slightly above June’s 2.5%. Meanwhile, the latest S&P Purchasing Managers’ Index (PMI) revealed a modest expansion in Eurozone business activity. The bloc’s flash August composite PMI, which includes data from both the services and manufacturing sectors, rose to 51.2 from 50.2 in July – a reading above 50 indicates growth. A solid increase in services activity, led by France which hosted the Olympic Games, offset a contraction in manufacturing, which reached an eight-month low. In Japan, business activity rose at its fastest pace since May 2023, with the composite PMI rising to 53.0 from 52.5 in July.
Figure in focus: $1,000,000
Gold prices rose to record highs last week, with the spot price reaching $2,531.60 per troy ounce on Tuesday – a 20% year-to-date rise. The increase meant the value of a standard gold bar (weighing 400 troy ounces) exceeded $1m. Hopes that the US will start easing monetary policy helped push the price of the precious metal higher, while the increase in value also likely reflects global economic uncertainty and market volatility - investors typically view gold as something of a safe haven during periods of uncertainty.
Words of wisdom
Digital twin: A virtual copy of a physical object or place, which can be used to design or modify a product through easier, cheaper or safer means. Artificial intelligence and machine learning are combined with real-time operations, such as via sensors, to help improve decision-making. For example, a digital twin of a bridge can test its resilience to high winds while in healthcare, a digital twin of a patient’s organs can help doctors optimise treatments from surgeries to prescribing drugs. Consultancy McKinsey & Co expects the global market for digital twin technologies to grow around 60% a year between 2023 and 2027 to $73.5bn.
What’s coming up?
Monday sees Germany publish its closely monitored Ifo Business Climate Index - it follows up with its second quarter (Q2) GDP growth rate on Tuesday. On Thursday, the US issues a second estimate for Q2 GDP growth, while the Eurozone releases its latest Industrial and Economic Sentiment indicators. The bloc also issues a flash inflation estimate and its latest unemployment rate on Friday when Canada and India each report Q2 GDP growth and Japan updates with its own unemployment figures.
Related articles
View all articles
Disclaimer
This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.
Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales, No: 01431068. Registered Office: 22 Bishopsgate, London, EC2N 4BQ.
In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.
Risk Warning
The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.