Investment Team Handelsbanken Wealth & Asset Management
02 Sep 2024 5
Key takeaways
Economic data continues to be supportive for September interest rate cuts in the US and Europe, while Nvidia’s earnings update reaffirmed the artificial intelligence (AI) growth story.
Inflation continues falling across the Eurozone and US
The implications of helpful inflation updates on both sides of the Atlantic helped European and US share prices, with those in Europe reaching a new record high. Preliminary data on August headline inflation for the Eurozone continued to show slowing – a three-year low of 2.2% on an annual basis. This was in line with forecasts, and was notably lower than July’s figure of 2.6%. In the US, the central bank’s key measure of inflation, the headline personal consumption expenditure price index, increased by an annualised 2.5% over the same period, also in line with analysts’ forecasts. Both readings reinforced expectations of interest rate cuts by the European and US central banks in September.
Nvidia second quarter profits more than double
Briefly the world’s most valuable quoted company earlier this month, AI mega stock Nvidia reported second quarter sales up by 122%, compared with the same period last year. The company also reported net profits of $16.6 billion compared with $6.18 billion in the same period in 2023. This update from the company was eagerly awaited by the market because Nvidia has been the largest contributor to the rise of the US stock market so far this year, and as it is one of the most important bellwethers for the state of the AI technology boom. Despite a muted initial reaction and some profit taking following the earnings release, the market consensus seems to be that the investment case for the company and growth prospects for the AI sector remain intact.
Market moves
US economic growth for the second quarter of 2024 was revised from 2.8% to 3% on an annual basis, supporting a recovery in the dollar during the final week of the month.
The Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for global oil demand in 2024, from 2.25 to 2.11 million barrels a day. Weaker demand from China was a major catalyst.
After rising above 65 early in August, the VIX ‘fear index’ (the CBOE Volatility Index – a measure of market expectations for volatility) fell to 15 by the end of the month. The VIX measures expected volatility in the S&P 500 Index, which represents the 500 largest listed US companies.
What to look out for this week
Private sector survey data in China (Monday) and the US (Tuesday) will be analysed for the strength of manufacturing demand and confidence.
US non-farm payrolls will be released on Friday. Economists expect 165,000 jobs were added to the US economy during August, compared with 114,000 in July. The unemployment rate is expected to have eased to 4.2%.