Market Update

The week concluded with stocks on a decline, influenced by rising oil prices and anticipated policy shifts from major central banks, intensifying market unpredictability. The US observed a truncated trading week due to the Labour Day holiday on Monday.
Tech powerhouse, Apple, saw its stocks dip, significantly influencing the market's direction. This descent was in response to reports suggesting China's move to restrict government officials from utilizing iPhones as a measure to curb the reliance on foreign tech. While the Chinese government did not formally announce these restrictions, growing apprehensions hint at Apple potentially getting embroiled in the escalating geopolitical discord between the US and China, both of which are enhancing their technological and cybersecurity postures.
In the US, the ISM's August 2023 report presented an unexpected upswing in service sector activities with new orders recording a quicker expansion. Weekly jobless claim figures were more optimistic than anticipated, indicating a persistent demand in the labor sector. This was despite the unemployment rate ticking up to 3.8% in August 2023 from the previous 3.5%. Policymakers' meticulous evaluation of the labor market and overall economic vigor means any signs of a slowdown or decline will be meticulously analysed to guide their policy decisions.
Rising to their highest in 10 months, oil prices were driven by production reductions from key players, namely Saudi Arabia and Russia. Given China's status as the world's primary crude oil importer, the oil market found stability as the week advanced, with investors pivoting their attention to trade metrics. Both exports and imports recorded declines in August 2023, though the slump wasn't as pronounced as predicted, partially due to a dip in foreign demand. The data, however, highlighted possible stabilization in certain sectors, expected to benefit further from recent policy endeavors aimed at invigorating demand and catalyzing economic growth.
The European Central Bank (ECB) is slated to host its monetary policy gathering on 14 September. With prevailing uncertainties, markets are wrestling with the dilemma of whether a rate hike is imminent, especially amidst signs of the region's economic growth waning.
Recent statistics showcased a decline in the eurozone composite PMI to 46.7 in August 2023, indicative of worsening conditions. Additionally, the eurozone GDP for Q2 underwent a downward revision, reflecting a 0.1% growth quarter-on-quarter. As we've highlighted previously, Central Banks endeavor to guide markets using narratives to steer inflation expectations. Yet, recent comments from ECB officials present a murky picture, accentuated by the Fed's ambiguous stance since their last policy meet in July. Officials persist with their data-driven approach, expressing concerns over the sluggish cooling of core inflation.
Across the channel, the British pound faced depreciation, especially after Bank of England's Governor, Andrew Bailey, addressed MPs. Bailey forecasts a marked downturn in inflation for the year and cast skepticism over another impending interest rate surge. In his view, the peak of the interest rate cycle is now within closer reach, particularly noting the dwindling wage growth and evident signs of economic deceleration, partly attributed to prior rate hikes.