For the football lovers, the Premier league is back this evening. Even better news for Arsenal fans, as Tottenham striker Harry Kane, who consistently scores in the North London derby, has seemingly agreed a deal to join German champions, Bayern Munich. The urge to win trophies and compete in the Champions league was greater than staying to eventually make history and break Alan Shearer’s premier league top scorer record. Tough decision!
Moving on from the exciting transfers news, US inflation data was released on Thursday. Headline inflation for the month of July came in at 3.2%, a rise from the previous month’s 3% figure. Core inflation (excludes energy and food prices) was 4.7%, slightly below expectations of 4.8%. Housing costs were once again the leading contributor, which was up 7.7% year on year. Inflation within the US has been on a steady decline from its peak of 9.1% in June 2022, however investors believe the “sticky” part of inflation is now kicking in and we can expect the US Fed to carefully consider if any additional rate hikes are required. With oil prices rising over recent months, it is no surprise to see headline inflation nudge up and this is likely to continue next month.
Last week, Fitch, an American credit rating agency surprised markets by downgrading US credit to AA+. This week, Moody’s, another established credit rating agency downgraded credit ratings of many mid-cap and small-cap US banks, with concerns that the banking sector will be tested by potential liquidity and profitability risks. This came off the back of weaker second quarter results for some smaller US banks, as the elevated interest rates have led to tighter credit standards and therefore lower loan demand from businesses and consumers.
UK GDP was announced this Friday morning and came as a surprise, as for the month of June (year-on-year) GDP increased by 0.9%, beating expectations of 0.5%. In the three months leading up to June, the GDP rate was 0.2% and the office of National Statistics claimed the additional bank holiday in May was a major factor for increased output in June. Sterling erased recent losses to rebound against the USD to 1.27. However, it seems that good news can lead to bad news as the solidified strength in the UK economy may cause the Bank of England (BoE) to continue further with interest rate hikes. The potential for higher rates weighed on the UK large cap index, which has fallen around 1% today.
China’s post pandemic recovery has stuttered since the start of the year and inflation data this week came in negative, at -0.3%. Producer price index (PPI) is a measure of costs for manufacturers and was -4.4%, better than the -5.4% expected. This now puts China’s economy into the state of deflation – a decline in the price levels of goods and services with global demand for Chinese goods faltering. China’s central bank have pushed back against calls for further policy changes after measures such as the easing of property curbs have been implemented.
Markets continue to be choppy in August, after a strong July. While we monitor and review markets on a daily basis, we prefer to focus on the long-term (multi-years) when it comes to strategic decision making. Referring back to the start of the premier league, consistency within a season is the ultimate key to success and we will all be hoping our beloved clubs can break the Manchester City era of dominance.
Nathan Amaning, Investment Analyst
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