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Markets look ahead to Jackson Hole

Macroeconomic data to finish last week once again helped to quell fears of a hard US economic landing, supporting stock markets on Friday. The next clues about how the Federal Reserve (Fed) views the state of the economy will come at the end of the week out of the Economic Policy Symposium in Jackson Hole, USA. Monday, Asian trading was mixed with the Nikkei taking a hit due to a sudden surge in the yen Monday morning.

Date
Author
Shane Strowmatt, LGT
Reading time
5 minutes

Jackson Hole
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This week, monetary policy will be in focus when key figures from the world’s largest central banks meet in Jackson Hole. The gathering of central bankers runs Thursday through Saturday and will be headlined by Fed Chair Jerome Powell, who speaks Friday. Market participants will dissect Powell’s comments for his understanding of the recent market turmoil, economic data and what it all means for the Fed’s next policy decision due mid-September. Also expected this week are the Canadian Consumer Price Index (Monday) and a slew of Purchasing Managers’ Indices from various countries (Thursday).

Japanese stocks suffer under stronger yen

In the Asia-Pacific region, stock markets were mixed to start the new week. In Tokyo, the Nikkei 225 was trading down about 2% after the yen dropped rapidly on Monday morning. The USD/JPY exchange was just above 145, down from more than 149 on Friday. Macroeconomic data wasn’t helping Japanese stocks either: core machinery orders dropped 1.7% in June when compared to a year earlier. The market consensus was for a strong rise.

Elsewhere in Asia, South Korea’s Kospi was also trading in the red, down about 1%. In Australia, the S&P/ASX 200 was trading just slightly in positive territory. Hong Kong's Hang Seng Index was up 0.9%, while the CSI 300 gained 0.3%.

Later this week, central banks will provide more information about Asian-Pacific monetary policy. the Reserve Bank of Australia releases the minutes of its latest policy meeting (Tuesday), China announces its one- and five-year loan prime rates (Tuesday) and the Bank of Korea publishes its latest interest rate decision (Thursday).

Another positive surprise from US consumer data

The University of Michigan Consumer Sentiment Index increased in August to 67.8 points from July’s 66.4 points, beating economists’ expectations. The gain is linked to better sentiment among Democrats given Vice President Kamala Harris’s candidacy for US President in the November election, according to Friday’s survey release. Last week, US retail sales data also reassured traders that the US consumer climate is not unravelling rapidly with retail sales increasing by 1% in July and surpassing economists' median forecast.

In New York, stock indices continued to make gains to finish last week. The Dow Jones Industrial finished Friday’s session 0.2% higher and the S&P 500 gained 0.2%. The Nasdaq-100 was up 0.1%.

Swiss manufacturing, construction on the rise

Swiss secondary sector production increased by 6.4% year-on-year in the second quarter, marking the largest rise since the third quarter of 2021. Industrial production saw significant year-on-year growth in April (8.0%), May (8.6%), and June (5.6%), culminating in a 7.3% increase for the entire quarter. Construction production also rose by 0.8%, driven by a 2.9% increase in building and a 10.8% rise in civil engineering, although specialised construction activities declined by 1.7%. Gross domestic product growth in Switzerland accelerated to 0.5% in the second quarter, up from 0.3% in the first quarter, according to preliminary data released last week. The SMI gained 0.3% on Friday, a smaller gain than most other European markets with the Euro Stoxx 50 finishing up 0.7%.

UK retail sales bounce back

British retail sales rose by 0.5% in July, following a revised 0.9% decrease in June. The increase was primarily driven by a 4% rise in department store sales and a 3.5% increase in sports equipment sales, aided by the Euro 2024 football event. The news comes one day after the British government said the UK economy expanded by 0.6% in the second quarter.

Corporate and macroeconomic calendars

Corporate news in focus: Quarterly figures from Palo Alto Networks.

Economic data in focus: Bundesbank monthly report.

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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