UK annual inflation rose to 3.8% in July, the highest in 18 months, fuelled by higher food and airfare costs. Services inflation, a key gauge for the Bank of England, also climbed to 5.0% from 4.7%. On the market front, the UK’s FTSE 100 Index reached a record high this week, climbing 2.00%. In Europe, the Euro Stoxx 50 index gained 0.73% on the week.
U.S. Federal Reserve Chair Jerome Powell, speaking at the Jackson Hole Symposium on Friday, struck a dovish tone by hinting at potential rate cuts. He highlighted growing downside risks to employment amid slowing labour market conditions, while acknowledging that tariffs are adding upward pressure to consumer prices, though the extent and timing remain uncertain. The Fed’s baseline view is for a one-off upward shift in prices, but Powell cautioned that these effects may take time to materialize. Overall, he described the economy as facing upside risks to inflation and downside risks to employment, suggesting the evolving balance may justify a policy adjustment. U.S. stocks rose after the remarks, and traders assigned a nearly 90 percent probability of a 0.25% interest-rate cut next month, up from about 75 percent earlier.
The S&P 500 (+0.27%) rebounded on Friday, closing slightly higher after four consecutive days of losses. Within the index, the energy, real estate, financials, and materials sectors posted the biggest gains. Large-cap value stocks outperformed their growth counterparts, which lost ground. The tech-heavy Nasdaq Composite (-0.58%) ended the week lower, with profit-taking weighing on sentiment amid renewed doubts over the sustainability of heavy AI-related infrastructure spending. The Dow Jones ended the week up 1.53%.
An early reading of the S&P Global U.S. PMI showed business activity in August expanding at the fastest pace this year, with the composite index rising to 55.4, well above expectations and marking the 31st straight month of growth. Services activity eased slightly to 55.4, while manufacturing surged to a 39-month high of 53.3, driven by stronger demand and inventory building. However, both sectors reported the steepest rise in input costs since May, with tariffs pushing prices higher and firms passing these increases on to customers at the fastest pace since August 2022.
Japan’s stock market fell over the week, with the Nikkei 225 Index declining 1.72%. The 10-year Japanese government bond yield climbed to 1.62%, near its highest since 2008, after stronger-than-expected July inflation reinforced expectations of another BoJ rate hike as early as October.
Mainland Chinese stocks rose this week, supported by easing U.S.-China trade tensions. The Shanghai Composite rose 3.49% and Hong Kong’s Hang Seng added 0.12%. Retail investors have fuelled the rally, with margin debt hitting its highest level since 2015 as households seek better returns amid low interest rates and limited investment options.
In commodities, Brent oil rose 2.5% on the week, while gold advanced 1.1% amid growing expectations of rate cuts.
Market Moves of the Week
South Africa’s CPI rose to 3.5% y/y in July (from 3.0% in June), the highest since Sept 2024, with prices up 0.9% m/m on food, municipal tariffs, and fuel. Food inflation remains the key driver, accelerating to 5.7% y/y, led by meat (+10.5%), vegetables, and other food items. Beef prices surged on supply disruptions from foot-and-mouth disease, while risks from avian flu may keep food costs elevated into Q3. Although global supply (notably Brazil) could ease pressures later in the year, persistently high food prices continue to erode lower-income households’ spending power.
A significant milestone has been reached in South Africa’s rail reform journey, with the government announcing on Friday that 11 of the 25 train operating companies (TOCs) that applied for third-party participation in Transnet’s rail network have met the requirements and will move to the next stage of negotiations and contracting. Minister of Transport Barbara Creecy stressed that this step is not about cannibalising Transnet’s freight business but about adding much-needed capacity, with private operators securing slots across 41 routes that carry bulk commodities such as coal, iron ore, chrome, manganese, sugar and fuel. The initiative, which includes firms like Grindrod, is expected to improve efficiency in a network long hampered by Transnet’s operational challenges, while also laying the groundwork for economic growth, job creation and greater sustainability.
The All-Share Index rose 0.76% this week, boosted by Property and Financials. The local currency strengthened against the U.S. dollar, moving to R17.43/$ from last week’s R17.61/$ level. SA government bond yields edged higher on the week, rising 0.05%.
Chart of the Week:
South African inflation quickened to a 10-month high in July, reducing the chance of another interest-rate cut when policymakers meet next month. Source: Bloomberg.
Credits: Strategiq
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