Another month comes to an end, US equities remain more in favour than European ones as has been the case for many a year. So far this year the S&P 500 is up until circa 8%, both the FTSE 100 and the Stoxx fifty are down. Year to date the NASDAQ index of technology shares have outperformed the FTSE 100 by some 20%.
August has had its moments over the years, however, September is traditionally a poor performing month for equity prices. One statistician found a link between the performance of equity markets and the holiday season. Stock markets feel the effects of the post-holiday blues apparently. The focus will remain, as it almost always does, on the US economy. The strong probability is that the Federal Reserve will raise interest rates again this month. Equity markets in Europe took a hit again at the end of the week as Trump upped the anti-once again over trade. Whether the trade agreement between Mexico and the US should give hope for the EU remains to be seen. However, it may be worth reminding ourselves that Trump's bark is often worse than his bite.
There have probably been a few bricks added to the wall of worry in the past week, as Trump instructed aids to proceed with 200bn dollars of tariffs on Chinese exports as of next Thursday. It is also possible that tariffs will be placed on Canadian auto exports to the US. The spread between Italian and German bunds rose again post a meeting between Italian and Hungarian ministers. That spread may widen further as Fitch cut Italy’s credit outlook from stable to negative. Lastly, emerging market currencies weakened once again, having found some stability in the past week.
Looking to the week ahead, the FTSE 100 is now back to the bottom of its trading level for the year as is the Stoxx 50. The S&P 500 remains close to its all-time high. It is possible that the European markets could gain some momentum from here but it’s uncertain where that could come from.
Wall Street is shut on Monday for labour day, so as Wall Street rests so does the rest of the world pretty much. There is plenty of economic data in the coming days, particularly in the form of purchasing manager surveys, which are always released at the start of the month. Eurozone final reading for second-quarter GDP will also make some headlines. For the US aside from PMI’s, unemployment and wage growth will be a focus as an indicator of inflation expectations.
Schools return and fund managers likewise to their desks from the summer holidays once again trying to decide how to play the final quarter of the year. But then again there is nothing new there.