By Bas Kooijman, CEO and Asset Manager at DHF Capital SA
As we close out another week in the global markets, investors are keeping a close eye on inflation trends, central bank decisions, and signs of economic resilience across key regions. Here’s a recap of the latest developments in the United States, Europe, and Asia.
United States – Inflation Steady, Markets React to Fed Tone
U.S. equities ended the week on a softer note, weighed down by cautious remarks from Federal Reserve officials. The Nasdaq Composite slipped 0.65%, while the S&P 500 and Russell 2000 also posted losses. Energy stocks stood out as an exception, rising alongside oil prices after renewed pressure on European nations to reduce reliance on Russian oil and gas.
The Fed signaled a more measured approach to cutting interest rates. Chair Jerome Powell emphasized the “challenging situation” of balancing sticky inflation with a cooling labor market. His comments, echoed by other Fed officials, tempered hopes for aggressive easing.
Economic data was mixed but showed resilience. Core inflation, measured by the Fed’s preferred PCE index, rose 0.2% month-on-month and 2.9% year-on-year, unchanged from July. Meanwhile, GDP growth for Q2 was revised upward to 3.8%, driven by consumer spending. Purchasing Managers’ Indexes (PMIs) pointed to ongoing expansion in manufacturing and services, though at a slower pace. The housing sector offered some bright spots, with new home sales reaching their highest level since January 2022.
Treasury yields rose at the short end of the curve, reflecting reduced expectations for imminent rate cuts.
Europe – Modest Growth but Diverging Central Bank Paths
Across Europe, markets moved cautiously higher, with Italy’s FTSE MIB leading gains at +0.79%, while the pan-European STOXX 600 remained flat. Investors weighed mixed signals from business surveys and central bank updates.
In the eurozone, business activity showed modest improvement. The composite PMI climbed to a 16-month high of 51.2, signaling expansion led by the services sector. Manufacturing, however, slowed, and overall confidence dipped. In the UK, momentum weakened as the PMI fell to 51.0 from August’s 12-month high, reflecting weaker demand in both services and manufacturing, particularly in the auto industry.
Confidence readings were also mixed in Germany. Business sentiment fell sharply according to the Ifo survey, but consumer confidence surveys suggested households are feeling slightly less pessimistic about their incomes heading into autumn.
On monetary policy, central banks signaled different approaches. Sweden’s Riksbank cut rates by 25 basis points to 1.75%, marking its third cut this year, while hinting that it may pause further moves. Meanwhile, the Swiss National Bank left rates unchanged at 0%, with inflation well within its target range.
These developments highlight Europe’s uneven recovery, where services continue to support growth, but industry and consumer sentiment remain fragile.
Asia – Japan and China Show Contrasting Market Dynamics
In Asia, markets offered a mixed picture. Japanese equities advanced, with the Nikkei 225 up 0.69% and the broader TOPIX index gaining 1.25%. However, inflation data from Tokyo came in more than expected, rising 2.5% year-on-year, slightly below forecasts. This reduced expectations of an immediate rate hike from the Bank of Japan, though policy adjustments remain possible later this year. Meanwhile, the Japanese yen weakened against the U.S. dollar, reflecting both strong U.S. data and ongoing domestic political uncertainty ahead of leadership elections.
In China, mainland stock markets rose modestly, with the CSI 300 up 1.07%, supported by abundant domestic liquidity and optimism around artificial intelligence innovation. By contrast, Hong Kong’s Hang Seng Index fell 1.57%, reflecting global investor caution. Despite gains in equities, concerns linger over slowing economic momentum and persistent deflationary pressures.
Together, these developments underline how Asia is navigating divergent paths: Japan is balancing potential policy tightening with weaker inflation signals, while China continues to rely on liquidity and targeted reforms to stabilize growth.
Looking Ahead
Global markets remain sensitive to central bank commentary and fresh economic data. The coming weeks will bring further insights into inflation, labor markets, and consumer demand—factors that will shape investor sentiment into the final quarter of the year.