Market Update – 31st August 2023.

Positive news emerged from China this week. The Chinese government extended tax cuts for foreign nationals, meaning they could enjoy taxable deductions on rent, language training, and children’s education, amongst other things, right through to 2027. The move was made in order to incentivise China’s external pool of talented workers to refrain from leaving the region and in a bid to attract new skilled workers to foreign firms post-Covid. But the Chinese authorities have not stopped there. Reports this week also revealed plans to slice stamp duty on stock trading by up to 50% in order to further buoy the stock market of the world’s second largest economy. This is the first cut of such magnitude since 2008, and both measures are further evidence of the practical initiatives the government are executing to get China’s economy back on its feet.

In the US, consumer confidence slumped in August 2023. The Conference Board’s monthly Consumer Confidence Index showed a reduction to 106.1 this month, falling from July’s 114. Specifically, and perhaps unsurprisingly, responses to the survey showed that people are most worried about the rise in fuel and food prices, and that this plunge in sentiment is evident across all age groups of the country’s population. The dip likely reflects that consumers are concerned over inflating prices and are potentially harbouring worries about the Fed elevating interest rates further. As Jerome Powell stated in his recent speech, the Fed have always maintained a data dependent stance in relation to battling inflation back to its 2% target. They are therefore likely going sustain their current rate increases until there is solid evidence that supports a reduction, and so we may continue to see the effects of this play out on consumer sentiment.

One of the pieces of evidence that would sway the Fed to lower interest rates would be a softer labour market as they need confirmation that price growth has exerted sufficient pressure on consumers, and that’s potentially what they got this week. Markets took a bad news is good news approach this week and enjoyed a strong session this week following the release of data from payroll processer ADP that showed that the private sector in the US added 177,000 jobs in August, lower than the upwardly revised 371,000 increase recorded in July. This figure was smaller than anticipated, arguably adding to hopes about the outlook for interest rates.

Still to come this week we have Eurozone CPI and unemployment, US nonfarm payrolls, US initial jobless claims and Ireland’s GDP.

Nicola Tune, Portfolio Specialist 

The latest market updates are brought to you by Investment Managers & Analysts at Wealth at Work Limited which is a member of the Wealth at Work group of companies.

Links to websites external to those of Wealth at Work Limited (also referred to here as 'we', 'us', 'our' 'ours') will usually contain some content that is not written by us and over which we have no authority and which we do not endorse. Any hyperlinks or references to third party websites are provided for your convenience only. Therefore please be aware that we do not accept responsibility for the content of any third party site(s) except content that is specifically attributed to us or our employees and where we are the authors of such content. Further, we accept no responsibility for any malicious codes (or their consequences) of external sites. Nor do we endorse any organisation or publication to which we link and make no representations about them.