Market Update – 23rd August 2023.

This week has generally been a quiet one for economic reports. On Monday, data came out that Britain’s labour market is losing its inflationary significance.  A survey by Adzuna published for the month of July revealed that for the first time this year starting salaries and vacancies have fallen. Companies do tend to slow their hiring in the summer months. However, this most recent data arguably provides some evidence of a tightening UK labour market, one that may please the Bank of England (BoE) who eagerly await signs that their continued increasing of interest rates has started to do its job. The BoE, who raised interest rates for the 14th successive time in August, will no doubt be monitoring employment closely as it ponders how many rate increases are now needed to dampen sticky inflation that remains well above its 2% target.

In other news, country leaders that comprise the BRIC nations (Russia, India, South Africa, Brazil and China) met on Tuesday to debate the merits of expanding the bloc’s membership. So far, it is alleged that 40 countries are eager to join the grouping, with some sending representatives to South Africa to be considered. Although some leaders, such as Lula Da Silva, are wary of offering inclusion to other countries in case it dampens their own influence within the membership, China’s XI Jinping is hoping that more members will lend further authority to the coalition and their goal of becoming a Champion of the Global South.

XI Jinping’s attendance at the meeting is also thought to have boosted market sentiment this week following a momentary dip after the People’s Bank of China made surprising decisions about its loan prime rates. In a sporadic show of frustration that has since been corrected, markets were off this week when the bank trimmed its one-year loan rate by 10 basis points while keeping the five-year rate unchanged. The outcome of the cuts was said to be underwhelming for investors but in reality, China still has plenty of stimulus levers to pull. This is likely just one small step on the path of more growth measures to come that the government have been promising the Chinese people this year and that will undoubtedly prove supportive for markets.

Coming up we have US jobless claims; the Jackson hole conference, which will allow markets to digest central bankers’ commentary; Japanese CPI, European/UK manufacturing PMI and Irish Consumer Confidence.

Nicola Tune, Portfolio Specialist 

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