Equities are set to recover some ground as China supports markets

Federal Reserve Chair Jerome Powell’s suggestion that the Fed would “proceed carefully” when considering any further interest rate changes seemed to leave investors at each Friday, helping the benchmark equity indices move higher after an early afternoon stumble. Powell’s speech to a gathering of central bank officials in Jackson Hole wasn’t without hawkish notes, of course, as he held out the possibility of more interest rate increases should the economic data prove too hot for an inflation-busting Fed. Friday’s gains left the S&P 500 Index up less than 1% for the week, while the Nasdaq was 2.2% higher, thanks in part to a solid week for tech as investors positioned for the quarterly earnings report from Nvidia. The Dow Jones Industrial Average was still about 0.44% lower, hurt in part by a stumble by Boeing on Thursday. Meantime, European equities ended practically flat on Friday as measured by the performance of the Euro Stoxx 50 Index which also ended practically unchanged for the week. 

Summary for 28.08.2023 

• Most Asian equities rose sharply on Monday, with Chinese shares in the lead after the country rolled out more measures to support its battered equity markets. At the same time, the focus turned to key indicators from the world’s largest economies this week. Shares in Australia Australia, Japan and South Korea advanced as well. 
• European and US equities are poised to register good gains at the open as Fed’s Powell comments on Friday pointed to signs of continued strength in the US economy, while proceeding carefully with additional rate hikes.  
• Oil prices were marginally lower this morning, paring earlier gains, as investors stayed fretful over the pace of economic growth in China, and the prospect of further US interest rate hikes that could dampen fuel demand.  
• China on Sunday announced new measures to draw investors back into its battered equity markets, by most notably halving the stamp duty on equity trades from 0.1% to 0.05%. The China Securities Regulatory Commission also restricted share sales by top stakeholders at firms whose equity prices have fallen below certain levels. It also cut margin ratios for leverage trades and said it will slow the pace of IPOs citing “recent market conditions.” 
• Profits earned by China’s industrial firms fell by 15.5% from a year earlier in the first seven month of 2023 amid weakening economic recovery, feeble demand, and persisting margin pressures. The decrease followed a 16.8% slump in the prior period and a 4% fall in 2022, with profits shrinking in both state-owned firms and the private sector. 
• Federal Reserve Chair Jerome Powell, speaking at the Jackson Hole Symposium, emphasised the potential necessity for the US Federal Reserve to implement additional interest rate hikes in order to effectively manage inflation, as policymakers carefully evaluate indications of diminishing inflation alongside the robust performance of the economy and labour market. At the same time, Powell suggested the Fed could hold rates steady at its next meeting in September, as officials assess the incoming data and the evolving outlook and risks. 
• Now that the Jackson Hole meeting has passed, the next big updates on the data front will likely be the Personal Consumption Expenditures (PCE) Price Index for July on Thursday and the Employment Situation report for August, which the Bureau of Labour Statistics will release next Friday. Other important data to be released in the US this week includes the ISM Manufacturing PMI and the second estimate of Q2 GDP growth. Elsewhere, the focus will be on inflation rate figures for the Euro Area, Germany, France, Italy, Spain, and Switzerland. Additionally, flash manufacturing PMI readings will be released for China, South Korea, India, Russia, Spain, Italy, and Canada. Finally, Turkey, Brasil, and Canada are set to report their Q2 GDP growth figures. 
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