Trading volumes were light during the summer period. The tech-heavy Nasdaq declined 1.9% while the S&P 500 lost 0.3%, both logging back-to-back weekly losses. In contrast the Dow Jones ended the week with a modest 0.6% gain, with value stocks outperforming growth. Financial stocks suffered losses on Tuesday after Moody’s cut the ratings of 10 mid-sized lenders, reigniting concerns about the sector’s health, although managed to pare back some losses as the week progressed. Energy was the best performing sector of the week with oil prices gaining and touched their highest levels of the year.
Thursday saw the release of the US CPI report with inflation rising at an annual pace of 3.2% in July, slightly below expectations. This however did little to spark investor enthusiasm and the following session the producer price index rose 0.8%, slightly ahead of the 0.7% forecast, putting pressure on stocks. Markets are currently expecting the Federal Reserve to keep rates steady at their next meeting in September, but upcoming economic data releases will be carefully scrutinised. Treasury yields moved higher with the 10-year yield ending the week at 4.17%.
The pan-European STOXX 600 ended the week little changed, with regional indices mixed. One notable development of the week was the announcement late on Monday that Italian banks would face a 40% windfall tax on profits, sending bank shares sharply lower. The hostile response prompted the government to backtrack and clarify that it would cap the levy at 0.1% of risk-free assets. This helped lift Italian bank stocks, but not to a full recovery. Italy’s FTSE MIB dropped 1.1% for the week.
European market sentiment was also dented by weak data out of China. Chinese exports sank 14.5% year-on-year in July, its weakest level since February 2020, while imports also fell more than expected. The following session inflation data was released and was just as gloomy, with both consumer and producer prices declining. For the week the Shanghai Composite dropped 3% and the Hang Seng shed 2.4%. Also adding to economic health concerns, property developer Country Garden plunged on news that it had missed interest payments on two international bonds.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.
This document has been produced by the EFG Harris Allday research team utilising data from documents produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.