Introduction

August 2024 was marked by volatility and cautious positioning across global markets. Rising oil prices, mixed inflation data, and diverging economic signals kept investors on edge. While central banks remained largely in “wait-and-see” mode, concerns over consumer fatigue, uneven corporate earnings, and persistent geopolitical tensions led to a modest pullback in risk assets. Defensive sectors outperformed, bond yields rose slightly, and commodity markets saw renewed attention.

United States

U.S. equity markets drifted lower in August. The S&P 500 declined 1.4% and the Nasdaq Composite fell 2.1%, weighed by profit-taking in large-cap tech stocks and signs of slower consumer spending. The July CPI report showed headline inflation rising to 3.4%, up from 3.0% the previous month, largely due to energy costs. Core inflation, however, continued to ease modestly at 3.1%.

The Federal Reserve kept rates unchanged and reiterated its “data-dependent” approach. Fed Chair Jerome Powell, speaking at the Jackson Hole Symposium, stressed the need for further confidence that inflation is durably returning to target before rate cuts can begin. Markets reduced expectations for a September cut, now seeing December as more likely. The 10-year Treasury yield rose slightly to 4.37%.

Europe

European markets declined amid political uncertainty and lacklustre economic data. The Euro Stoxx 50 lost 2.3% in August. Germany's industrial production contracted for a fourth consecutive month, and the eurozone composite PMI slipped to 48.7, indicating continued stagnation.

The European Central Bank kept rates steady at 3.75% and flagged potential cuts in Q4, dependent on inflation progress. Eurozone CPI remained at 2.2%, while core inflation eased slightly to 2.5%. The euro weakened modestly against the U.S. dollar, while bond yields moved higher across the region in tandem with global rates.

Asia-Pacific

Asia-Pacific markets were mixed. Japan's Nikkei 225 dipped 0.9% after hitting all-time highs in July, with investors locking in gains and reacting to yen volatility. The Bank of Japan maintained its policy stance but hinted that inflation conditions could soon warrant a shift - perhaps by early 2025.

Chinese equities gave up some of July's gains. The Hang Seng Index fell 3.5%, while the Shanghai Composite declined 1.8%, as weak trade data, declining property investment, and capital outflows continued to weigh on sentiment. Beijing responded with additional targeted stimulus measures focused on consumption and small businesses. Australia's ASX 200 rose 1.2%, supported by strong mining earnings and dovish commentary from the Reserve Bank of Australia.

Emerging Markets

Emerging markets saw modest declines. The MSCI Emerging Markets Index fell 2.1%, driven by weakness in Asia and South America. Rising U.S. yields and dollar strength pressured EM currencies, while capital flows turned more cautious.

India's Nifty 50 slipped 0.7% amid concerns about fiscal discipline in the wake of new subsidy announcements. Brazil's Bovespa fell 2.8% on renewed inflation concerns and central bank hawkishness. Turkey and South Africa also posted negative returns, while Indonesia and Vietnam outperformed modestly on stable inflation and strong export data.

Commodities

Oil prices rose sharply. Brent crude climbed to USD 94/barrel, its highest level since August 2023, driven by falling U.S. inventories, strong global demand, and reduced OPEC+ output. Analysts raised price forecasts for Q4, with energy equities among the top-performing sectors.

Gold was flat, ending the month at USD 2,398/oz, as geopolitical demand and central bank buying were offset by rising real yields. Copper fell 2.4% on weaker Chinese factory activity and cautious investor sentiment, though long-term supply constraints remained supportive.

Fixed Income & Currencies

Global bond yields rose moderately in August, with inflation concerns driving a steepening of the yield curve. The U.S. 10-year yield closed the month at 4.37%. Credit spreads widened slightly across high-yield, while investment-grade remained resilient.

The U.S. dollar strengthened against most major currencies. The yen and euro weakened, while the Singapore dollar held firm amid strong current account data and steady MAS policy. EM currencies broadly depreciated as investors rotated defensively into developed market assets.

Outlook

With inflation no longer falling as quickly and central banks cautious on timing rate cuts, markets are likely to remain choppy heading into the final stretch of the year. Key risks include energy prices, election-related volatility, and the resilience of consumer demand.

Brightness Capital & Asset Advisory maintains a balanced view, favouring quality equities in resilient sectors, short-duration bonds, and selective exposure to commodities and emerging markets. Active portfolio management remains critical as monetary and fiscal signals diverge across global regions.