Weekly Market Recap: Resilience Amid Economic Uncertainty 

The week of August 12-16, 2024, was marked by significant economic shifts and market reactions across major global economies. In Germany, a sharp decline in economic sentiment highlighted growing concerns over the country’s economic outlook, while in the United States, modest changes in inflation and retail sales hinted at a complex economic landscape. Meanwhile, Japan’s return to growth contrasted with the cautious monetary adjustments in New Zealand. Amid these developments, commodities like Crude Oil and Gold experienced notable fluctuations, reflecting broader economic anxieties. Stock markets showed resilience, with key indices posting strong gains, buoyed by robust corporate earnings from major companies.

In August 2024, the ZEW Indicator of Economic Sentiment for Germany saw a sharp drop to 19.2 points, declining by 22.6 points from the previous month. This represents the most significant decline in expectations since July 2022. The assessment of Germany’s current economic situation also deteriorated, with its indicator falling by 8.4 points to a new low of minus 77.3 points.

The EURUSD saw a daily change of +0.56%.

In July, the PPI increased by 0.1%. Final demand goods saw a 0.6% increase in prices, while there was a 0.2% decrease in prices for services. Core retail prices, which excludes food, energy, and trade services, increased by 0.3%. Over the past year, the core final demand index increased by 3.3%.

The US Dollar Index decreased by 0.51% compared to the previous day.

New Zealand: Official Cash Rate (NZD)

On August 14, the Committee unexpectedly decided to decrease the Official Cash Rate by 25 basis points to 5.25 percent, aiming to balance caution with signs of easing inflation.

The NZDUSD had a daily decline of 1.28%.

In the second quarter of 2024, the level of employment in both the euro area and the EU expanded by 0.2% when compared to the previous quarter, showing a slight decrease from the 0.3% growth witnessed in the initial quarter. On an annual basis, employment demonstrated an increase of 0.8% in the euro area and 0.7% in the EU, following higher growth rates of 1.0% and 0.9%, respectively, in the first quarter of 2024.

In Q2 2024, the seasonally adjusted GDP in both the euro area and the EU expanded by 0.3%, maintaining the growth rate from the previous quarter. On a yearly basis, GDP rose by 0.6% in the euro area and 0.8% in the EU, showing a slight improvement from the 0.5% and 0.6% growth rates observed in Q1 2024.

According to Bloomberg, July saw a slight 0.2% month-over-month increase in US inflation, with annual inflation standing at 2.9%, primarily due to a significant rise in housing costs, which contributed to 90% of the overall increase. Core inflation, marking its slowest growth since early 2021, increased by 3.2% year-over-year. Expectations in the market for a September Fed rate cut have slightly diminished.

Stock futures and Treasury yields saw minor gains. The S&P500 increased by 0.5%.

US crude refinery inputs averaged 16.5 million barrels per day, with crude inventories up 1.4 million barrels, missing analysts’ expectations. Gasoline and distillate inventories fell below five-year averages, while propane inventories rose above average. Total petroleum inventories dropped by 3.1 million barrels.

Crude Oil saw a decrease in price by 1.7%.

In Q2, Japan returned to growth, driven by a rise in private consumption, signaling the potential emergence of a positive cycle where rising incomes boost spending. GDP increased at an annualized rate of 3.1%, surpassing expectations, following a contraction in the first quarter.

The USDJPY had a positive daily change of 0.32%.

Australia: Employment Change (AUD)

In July 2024, Australia’s seasonally adjusted unemployment rate rose slightly to 4.2%, while the participation rate reached a record high of 67.1%. Despite the increase in unemployment, employment grew by 58,000 people, leading to a near-record employment-to-population ratio of 64.3%. The labor market remains tight, with high participation and employment levels, even as unemployment and underemployment remain below pre-pandemic figures.

The AUDUSD experienced a 0.4% daily increase.

In Q2 2024, production output in the UK fell by 0.1% compared to Q1, mainly due to a 0.6% decline in manufacturing, though gains in water supply, sewerage, and electricity and gas partially offset this drop. However, June 2024 saw a 0.8% monthly increase in production, driven by a 1.1% rise in manufacturing.

The GBPUSD edged higher by 0.18%.

In July 2024, US retail and food services sales reached $709.7 billion, marking a 1.0% increase from the previous month and a 2.7% rise from July 2023. The May through July 2024 sales were up 2.4% compared to the same period last year. Retail trade sales specifically increased by 1.1% from June 2024 and 2.6% year-over-year. Notably, nonstore retailers saw a significant 6.7% increase from last year.

UK: Retail Sales m/m (GBP)

In July 2024, retail sales in Great Britain increased by 0.5%, rebounding from a decline in June, driven by summer discounts and sporting events.

The exchange rate between the Pound Sterling and the US Dollar fell by 0.23%.

In July, the seasonally adjusted annual rate of privately-owned housing units authorized by building permits was 1,396,000, which is 4.0% lower than June’s revised rate and 7.0% lower than the rate in July 2023.

The US Dollar Index retreated by 0.62%.

Crude Oil

During the week ending August 9, 2024, US Crude Oil refinery inputs averaged 16.5 million barrels per day, a slight increase from the previous week. Crude Oil imports averaged 6.3 million barrels per day, slightly up from the previous week but down 2.0% from last year. US commercial crude oil inventories rose by 1.4 million barrels but remain 5% below the five-year average. Gasoline and distillate inventories declined, contributing to an overall decrease of 3.1 million barrels in total commercial petroleum inventories. Crude Oil had 3.4% weekly gains.

The price of XAUUSD has risen by over 23% so far this year. This recent increase has been attributed to expectations that the US Federal Reserve may start lowering interest rates in September, along with growing geopolitical tensions that have boosted demand for this safe-haven asset.

The precious metal Gold (XAUUSD) concluded the week on Friday with a 3.15% weekly increase.

• S&P 500 increased by 4.0%
• DJIA was up by 3.0%
• NASDAQ 100 increased by more than 5.4%

Company Earnings

Wednesday, August 14, CSCO (Cisco Systems Inc.)

Thursday, August 15: BABA (Alibaba Group Holding Limited)

Thursday, August 15: WMT (Walmart Inc.)

Cisco Systems (CSCO) reported strong fiscal fourth-quarter results, exceeding expectations with adjusted earnings of $0.87 per share and revenue of $13.64 billion. For the full year, Cisco projects revenue between $55.0 billion and $56.2 billion, aligning with estimates. However, the company also indicated that it plans to implement further job cuts in the future. The stock saw a 6.6% weekly increase.

After reporting strong Q2 earnings that surpassed expectations and raising its annual sales forecast, Walmart’s (WMT) stock jumped 7.2%. Q2 revenue increased by 4.8% to $169.3 billion, while US comparable sales grew by 4.2%. Walmart’s e-commerce business experienced substantial growth, with a 21% increase globally and a 26% rise in its advertising segment. Despite a 43% drop in net profits due to a prior year’s gain, adjusted profits surged by 9.8%, exceeding analyst predictions. Walmart now anticipates annual sales growth of 3.8% to 4.8%, an increase from its initial projection. The stock price was up by 7.95%.

Despite a 4% increase in revenue year-on-year, reaching 243.24 billion yuan, both revenue and net income fell short of analyst expectations due to challenges in its core e-commerce business and increased competition in China. While the Taobao and Tmall group saw a slight decline in sales, Alibaba’s (BABA) cloud computing division showed promising growth, with revenue up 6% year-on-year and significant improvements in profitability. The company continues to focus on revitalizing its e-commerce business and expanding its cloud operations. The stock had 3.75% weekly gains.

As the week of August 12-16, 2024, concluded, global markets reflected a complex interplay of economic developments, with sharp contrasts between regions and sectors. While European economic indicators revealed growing concerns, other areas, like Japan, showed signs of recovery. The fluctuations in commodities and currencies underscored the uncertainty and volatility permeating global markets. Yet, amid these shifts, strong corporate earnings provided a stabilizing force, driving significant gains in major stock indices. This week’s events highlighted the ongoing tension between economic fragility and resilience across the global landscape.