Take Two: Volatility hits global stock markets; China’s exports slower than expected

12 August 2024 (3 min read)

What do you need to know?

Global stock markets experienced a sharp bout of volatility last week, mainly on the back of fears of a potential US economic slowdown and whether the Federal Reserve has taken too long to cut interest rates. On Monday US stocks suffered their worst day since September 2022 while Japanese shares fell 12% before rebounding. Over the week to Thursday’s close the S&P 500 was down 2% while European and Asian markets also endured losses. However, despite the fall, most major indices still remain in positive territory year to date, while the MSCI World Index is up 9% over the period.¹

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Around the world

China’s exports expanded at their slowest pace in three months in July partly on the back of trade tensions and higher tariffs on products in some markets. Exports grew 7% on an annual basis from 8.6% in June, far below expectations of 9.7%, raising concerns of slowing economic momentum despite government stimulus. Meanwhile imports increased, climbing to 7.2% in July. Elsewhere China’s Consumer Price Index inflation rose to 0.5% year on year in July, up from 0.2% in June, matching our own expectations but surpassing market forecasts of 0.3%.

Figure in focus: 50.2

Growth in Eurozone business activity stalled in July as the bloc’s final composite Purchasing Managers’ Index (PMI), which includes both services and manufacturing data, fell to a five-month low of 50.2 from 50.9 - a reading above 50 indicates expansion. The data signalled a loss of momentum on the back of reduced demand for both goods and services. Elsewhere US business activity remained relatively stable over the month, with the services sector offsetting more subdued growth in manufacturing activity. Overall, July’s final US composite PMI reading eased to 54.3, from 54.8 in June.

Words of wisdom

Middle-income trap: As countries grow wealthier, they risk becoming stuck in a middle-income band and could fail to achieve the right mix of investment and innovation to make the shift to becoming a higher-income country, according to the World Bank. It found this ‘middle-income trap’ was around 10% of annual US GDP per person, currently equivalent to around $8,000. More than 100 countries, including China, India and Brazil, face “serious obstacles” to becoming high-income countries in the next few decades, the World Bank said, given challenges such as ageing populations, rising protectionism in advanced economies and the need to speed up the energy transition.

What’s coming up?

The UK issues its unemployment rate for June on Tuesday, while both the US and UK publish their latest inflation numbers on Wednesday. GDP numbers will be in focus this week too given the Eurozone reports its second estimate for second quarter (Q2) growth on Wednesday, while Japan and the UK both report Q2 GDP growth data on Thursday.

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