Major Indices
| Index | Performance |
|---|---|
| S&P 500 | -0.16% |
| DOW Jones | +0.24% |
| NASDAQ | -0.51% |
| FTSE 100 | +3.12% |
| DAX | +0.97% |
| Nikkei 225 | +2.84% |
| Shangai Composite | +0.03% |
World Sector Performance
UK Unemployment data
Unemployment rates hit 4.3% as expected for the months May to July, with more people losing jobs over the Summer. This now a total of 1.464mn people without a job, and much higher than the 3.8% rate for the previous 3 months. This cooling labour market data pushes the BoE to halt rate hikes and weaken the pound. However, there has been another record month for British pay growth as total earnings were up 8.5%, reportedly due to one-off payments to NHS staff and civil servants. This puts further pressure on the BoE to raise interest rates. Next BoE decision is 22nd September next week, a 25bps hike is expected to 5.5%, with a terminal rate of 5.75%.
US inflation back on the rise
August inflation rose higher than expected to 3.7% which is the first increase since June 2022, driven by a surge in energy prices. Whilst this is still far from the levels seen last Summer, the FEDs target rate of 2% is still some distance away. Energy rose 10.5% in August as crude oil hit a 10-month high price of $81/barrel, caused by supplier cuts in Russia and Saudi Arabia. Core inflation however, which excludes energy and food, decreased to 4.3% in August from 4.7% in July. Markets didn't seem to be too bothered and the FED is still on track to keep interest rates at 5.5% next week, with a terminal rate believed to be 5.5%.
Arm's IPO breaks records
The largest IPO (Initial Public Offering) hit the markets with a bang. Arm is a British chip design company controlled by SoftBank and they focus on building Central Processing Units as well as General Processing Units. Their products can be found in Apple and Samsung devices. The stock listed at $51, and jumped 24.7% to $63.59. This shot the valuation up to $72bn from $54.4bn. Arm have 3 year earnings CAGR of 16.2%, with a 95% gross margin and asset/liability ratio of 2.59. Arm is trading at a premium to NVIDIA though, with a PE multiple of 170 vs NVIDIA's PE multiple of 109 (based upon the past 12 months).
ECB interest rate decision
The European Central Bank raised interest rates for the tenth consecutive time by 0.25% to an all time high. This caused the Euro to fall to a three month low against the dollar with EURUSD at 1.063. The ECB deposit facility rate now sits at 4% as the graph below shows. European stocks closed 1.5% higher after the news.
Other Headlines
- In 2022 a Russian pilot fired 2 missiles at an RAF spy plane over the Dead Sea, said to be caused by a technical malfunction
- The FED have shrunk their balance sheet by $1tn to slow economic growth and inflation
- Cannabis related equities are surging, as the US edge closer to legalising the drug
- UK economy shrunk more than expected at -0.5%, driven by strike action
- China's industrial output grew 4.5% in August from a year earlier, accelerating from the 3.7% pace seen in July
Coming Up Next Week...
- Wednesday: UK CPI inflation data YoY (Expected 7.1%)
FED interest rate decision (Expected to remain at 5.5%), economic projections and press conference - Thursday: BoE interest rate decision (25bps hike expected to 5.5%)
- Friday: UK Retail Sales data (Expected +0.5%)
BoJ inflation data YoY and interest rate decision