Introduction

Global markets took a breather in August 2023 after a strong run earlier in the year. Rising bond yields, mixed economic data, and persistent concerns about Chinese growth weighed on sentiment. While inflation continued to moderate in many regions, hawkish rhetoric from central banks reminded investors that policy rates could remain elevated for longer than previously anticipated. Equity markets were largely flat to lower, while bond and currency markets saw increased volatility as macro narratives shifted.

United States

U.S. equities drifted lower in August, with the S&P 500 falling 1.8% and the Nasdaq Composite dropping 2.2%. The pullback was largely attributed to profit-taking following strong July gains, rising Treasury yields, and cautious commentary from Federal Reserve officials at the annual Jackson Hole Symposium.

Fed Chair Jerome Powell reiterated the need to maintain restrictive policy until inflation was firmly under control, though he acknowledged progress. The July CPI, released in August, showed inflation ticking up slightly to 3.2% year-on-year due to higher energy prices, while core inflation remained relatively contained at 4.7%.

Europe

European equity markets were broadly lower amid weak economic indicators and rising bond yields. The Euro Stoxx 50 declined by 3.9%, with Germany's DAX underperforming as manufacturing output and sentiment deteriorated. The eurozone's composite PMI fell to contractionary territory, raising fears of stagflation.

The European Central Bank left rates unchanged in August but signalled that inflation pressures - particularly in services - remained too high to declare an end to the hiking cycle. Inflation data showed headline eurozone CPI stable at 5.3%, while core inflation also remained elevated, adding to the ECB's dilemma.

Asia-Pacific

China remained a source of concern for global markets. The Shanghai Composite declined 5.2%, while the Hang Seng Index lost 8.5%, as data continued to show broad economic softness. Consumer confidence, real estate investment, and industrial production all underwhelmed. In response, Beijing announced a series of targeted stimulus measures, including rate cuts, tax relief, and support for the property sector - but market reaction was muted.

Japan's Nikkei 225 declined by 1.7%, retracing some of its recent gains. The Bank of Japan maintained its dovish stance, with Governor Ueda affirming the need for continued accommodative policy, although inflation remained above 3%. Australia's ASX 200 slipped 1.4% amid weaker commodity prices and cautious corporate guidance.

Emerging Markets

Emerging markets underperformed in August, with the MSCI Emerging Markets Index down 6.2%. China's drag extended across Asia, while global dollar strength and higher U.S. yields placed pressure on EM currencies and equities. Foreign outflows increased across several major markets.

India remained more resilient, with the Nifty 50 flat for the month. Macroeconomic data, including strong GDP growth and stable inflation, continued to support sentiment. Latin American markets also held up relatively well, with Brazil's central bank cutting rates by 50 basis points and signalling further easing, helping to boost equities and local bonds.

Commodities

Oil prices climbed in early August before retreating late in the month. Brent crude finished around USD 86/barrel, supported by Saudi and Russian output cuts. However, concerns over Chinese demand and global growth capped further gains.

Gold traded sideways, closing the month near USD 1,940/oz. Rising real yields acted as a headwind, while geopolitical tensions and EM currency pressure provided offsetting support. Copper and industrial metals remained weak due to China-linked demand uncertainty.

Fixed Income & Currencies

Global bond yields rose in August. The U.S. 10-year Treasury yield hit a 16-year high of 4.34% mid-month before retreating slightly to 4.11%. Investors reassessed the Fed's “higher-for-longer” message, contributing to a steepening yield curve. European bond yields also climbed, reflecting sticky inflation and cautious ECB rhetoric.

The U.S. dollar strengthened against most major currencies. The euro and yen weakened, while the Chinese yuan fell to its lowest level against the dollar since 2007. The Singapore dollar remained relatively firm, anchored by MAS policy and strong fundamentals.

Outlook

August served as a reminder that macroeconomic risks - particularly in China and Europe - remain prominent despite improved conditions in the U.S. While inflation is trending lower in many regions, the path to rate normalisation is proving uneven and uncertain. Investor sentiment will remain sensitive to growth signals, policy pivots, and developments in global liquidity.

Brightness Capital & Asset Advisory continues to emphasise flexibility, fundamental strength, and forward-looking risk management. We maintain an active stance across asset classes with a bias toward quality equities, short-duration fixed income, and selective exposure to emerging markets as the global cycle enters a more delicate phase.