Market Report: all markets ease back, while investors wait for the Fed
Steve Clayton, head of equity funds, Hargreaves Lansdown: “Markets from Wall Street to Asia eased back last night, after London’s close, as investors took profits after a winning streak. All the main US indices, the Dow, the S&P and the Nasdaq, gave up around a quarter of a percent last night. Tokyo eased back around the same, with Hong Kong standing out as the main loser, with the Hang Seng index surrendering almost 1%. The dollar is currently attempting to snap out of a losing streak that has seen sterling climb back above $1.30 – the US dollar is also gaining ground versus a broad basket of currencies this morning, with the euro now buying just under $0.9000. The flip side of the dollar’s strength is the widespread decline in the value of the Japanese Yen today, which is now trading around ¥145.9 to the dollar.
Crude Oil is trading toward the bottom of the year’s range, with Brent futures just holding the line above $77 in a lacklustre trading session. In the hard commodities markets, iron ore stands out, rallying around 3% to $733, as it attempts to snap out of a losing streak that has seen it lose over 20% of it value since the spring, on fears of waning Chinese demand as their economy sags.
Bond markets are gently firmer in the UK, with gilt yields a few ticks lower. Investors globally are waiting for Fed chair, Jerome Powell’s Friday speech to the Jackson Hole economic forum. Whether he will give the markets what they want, which is more clarity on the path of US interest rates, is entirely up to him. But the Jackson Hole speech is one of the Fed’s annual rituals and comes in the run up to the US election. The Fed’s last steer was that maybe a September cut is on the cards, so markets have immediately moved on to guessing how many will follow after that. Meanwhile, a slew of Wall Street economists have been speculating that upcoming revisions to US employment data could show far weaker jobs growth than originally reported. If that does turn out to be the case, pressure on the Fed to cut rates more aggressively will only intensify.
Barratt Developments has announced that the Competition and Markets Authority is minded to accept the assurances given by Barratt to take actions that will prevent its acquisition of Redrow from harming competition. That should see the deal complete in due course without the further regulatory delays that a full Stage 2 investigation would have led to. This was never in doubt; the CMA’s Stage 1 investigations had suggested that only one out of the 400 local areas where the two companies operate posed any issues.
Tesla has been struggling of late to generate significant profits from making EVs. No such issues for China’s Geely Automotive, which owns Volvo and Polestar in the West and has huge Chinese operations manufacturing both for these brands and less familiar Chinese offerings such as Zeekr. Geely reported sales up 41% and profits soaring six-fold in the first half of the year. The gains come despite the rising imposition of tariffs against Chinese EVs. In the US, 100% import duties have effectively closed the US market to the Chinese, and the EU is erecting tariff barriers of its own. Geely is responding by shifting more production into locations inside the tariff zones, with investments into Belgium and South Carolina.”