Investment Manager’s Weekly Market Update: Stocks Up, Oil Prices Down, and Central Banks Ready to Act
The August stock market ended on a high note, with the Swedish stock market up 1.2% and the European Stoxx600 up 1.3%. Despite a slower week in the US, the overall weekly performance ended at +0.2%. Most markets have recovered from the August slump, with the Swedish Omxspi just 0.007 percentage points away from breaking even.
On the interest rate front, short-term rates remained stable, while long-term rates saw a slight increase. This could be seen as a normalization and not a cause for concern. Low US inflation figures suggest that the Fed may cut rates in September, a move that is also expected from the ECB, despite disappointing inflation numbers in the Eurozone.
Oil prices continue to decline, with Brent crude trading just below $77 per barrel. This is positive for inflation and household budgets.
The Swedish krona has strengthened against both the dollar and the euro.
Market analysts are now predicting a US rate cut on September 18, following the release of the American PCE inflation figures. The key question now is the size of the rate cut, which will depend largely on the state of the labor market. This week will be filled with US labor market data, culminating in the August employment figures on Friday. Market volatility may ensue if the data diverges significantly.
The ECB is also expected to cut rates, likely by 25 basis points. The broader economic climate will play a significant role in the ECB’s decision-making process. While European manufacturing indicators are weak, the service sector remains resilient.
For Sweden, upcoming data on the August Purchasing Managers’ Index and inflation expectations will be closely watched. Recent signals on the Swedish economy have been mixed, with a slowdown in manufacturing but a pickup in the service sector and consumer sentiment. The upcoming PMI figures will be crucial in maintaining consumer confidence.
Riksbank Governor Erik Thedéen will speak on Tuesday and may provide clarity on future rate cuts. However, Wednesday’s inflation expectation data will be more decisive in determining the size of the expected rate cut on September 25. A lower-than-expected inflation outlook could lead to speculation about a larger rate cut.
Overall, the markets are preparing for central banks to take action to support economic growth amidst global uncertainties. Stay tuned for more updates throughout the week.
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