August 2018 Monthly Market Review

US economic growth accelerated to 4.2. Geopolitical events weighed on share prices. US equities gained ground and significantly outperformed other major regions, as eco- nomic growth remained extremely robust.

Eurozone stock market indices registered declines in August 2018 affected by exposure to Turkey which came under pressure as the Turkish lira fell. Second-quarter GDP growth has been revised up to 2.2 annualized.

In the UK, the GBP fell due to uncertainty around Brexit negotiations and following further strength in the US dollar, GBP/USD fell 0.9 over the month. Brexit continues to dominate the UK headlines. The FTSE 100 dropped 3.3 over the month.

The Japanese economy recorded a slight increase in the second quarter of about 1on an annual basis. The details of the second-quarter GDP report were encouraging.

Asian equities posted negative return, with China and Hong Kong among the weakest countries. These trade tensions appear to already be affecting trade and output in China.

In August 2018 geopolitical events weighed on share prices in most major regions. There were sev- eral tensions that shook the currencies, commodities and global financial markets:

The crisis in emerging markets is a result of data releases on a number of major issues including debt, domestic credit bubble, institutional weaknesses, corruption, and poor political and economic lead- ership. Turkey and Argentina are not the only emerging markets at risk, investors have also been looking for signs of economic vulnerability in Brazil, India, Indonesia, Turkey and South Africa. This crisis has been further impacted by US-Iran sanctions, Brexit negotiations and the trade war between the USA and China. EM-exposed areas of the market performed poorly, including Asian financial markets. The financial markets have focused on political events. US President Donald Trump an- nounced that the United States and Mexico had reached a preliminary commercial agreement, which includes the automotive sector. Canada has not yet accepted the changes made to NAFTA. In the next month several US-CANADA members are scheduled to reach a final agreement that could potentially replace NAFTA.

On the stock market, the S&P 500 stock market index returned 3.3. Over the month, the technol- ogy sector recorded stronger performances, buoyed by robust gains in Amazon and Apple. Both of these companies exceeded a market capitalization of $ 1 trillion.

US economic growth accelerated to 4.2 (on an annualized quarterly basis in Q2). The significant growth in GDP in the second-quarter was supported by net trade (due to implementation of new tariffs and consumption that are both growing strongly). Consumption could support GDP growth in the third quarter as well. Consumers continue to benefit from fiscal reform and a stronger labor market. The unemployment rate dropped to 7.5 in July (2018), the lowest level since 2001.

The Federal Reserve is likely to continue to raise rates of 25 basis points per quarter. In September (2018), many events are scheduled by global Central Banks:

It’s unlikely that the Bank of England (BoE) is going to raise rates again until the Brexit outcome is clear. In the UK, the GBP fell due to uncertainty around Brexit negotiations and following further strength in the US dollar, GBP/USD fell 0.9 over the month.

Asian equities posted negative return, with China and Hong Kong among the weakest countries.These trade tensions appear to be already affecting trade and output in China. China responded with similar measures to the US tariffs on $16 billion of Chinese goods which took effect during the month. The Japanese economy recorded a slight increase in the second quarter of about 1 on an annual basis. The details of the second-quarter GDP report were encouraging.

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