The resilience of activity despite monetary tightening is now increasingly confined to the US economy, while signs of weakening are multiplying in Europe and China, note Guy Wagner and his team in their latest monthly market report "Highlights".

In the United States, July's retail sales figures point to a strong start to domestic consumption in the third quarter, suggesting continued positive GDP growth over the summer. “On the other hand, in the eurozone, service sector activity seems to be joining the downward trend already observed for several months in the manufacturing sector, with the purchasing managers' index for services falling below the 50 mark, which is supposed to separate expansion from contraction,” says Guy Wagner, Chief Investment Officer (CIO) of the asset management company BLI - Banque de Luxembourg Investments. “In China, there seems to be no end in sight to the rout in the property sector, with financial problems affecting new developers and house prices remaining under pressure, despite the recent support measures announced by the government.”

The easing in inflation rates is beginning to slow
The easing in inflation rates is beginning to slow, as the basis for comparison becomes less favourable in the second half of the year. In the United States, headline inflation rose from 3.0% in June to 3.2% in July. In the eurozone, the headline inflation rate remained unchanged at 5.3% in August.

Little news from Jackson Hole
At the traditional central bankers' conference in Jackson Hole in the United States, Federal Reserve Chairman Jerome Powell's speech contained little new information. He reiterated the need to continue efforts to bring inflation back down to 2%, while pointing out that the interest rate hikes already made require a more cautious approach in the future in order to avoid excessive tightening. The President of the European Central Bank Christine Lagarde focused on the fact that interest rates could remain permanently higher than the levels seen before the Covid era.

Long-term bond yields in Europe rose less than in the US
After hitting a new post-Covid record during August, the yield to maturity on the 10-year US Treasury note eased again, in the wake of Federal Reserve Chairman Jerome Powell's relatively neutral speech in Jackson Hole. In Europe, long-term bond yields rose less than in the United States, ending the month virtually unchanged.

Hopes of a soft landing for the US economy have so far prevented a major correction on the stock markets
The stock market euphoria triggered by the Artificial Intelligence theme subsided somewhat in August, with share prices consolidating their gains of the previous months. “However, hopes of a soft landing for the US economy have so far prevented a major correction,” concludes Guy Wagner. “In terms of sectors, energy was the only one to post a slightly positive performance, while utilities, materials and finance recorded the biggest declines.”