Japan’s modest increase in its official cash rate during July coincided with a “flash crash” in the Nikkei, possibly reflecting investor fears of a major unwind in the “carry trade”. The Nikkei declined -19.6% in the first 3 days of trade before rebounding strongly to close the month down -1.1%. The US unemployment rate climbed to 4.3% as non-farm payrolls surprised to the downside (and prior job gains between March 2023 and March 2024 were revised significantly lower). The US ISM Manufacturing index print pointed to contraction while the ISM Services index print indicated expansion. US CPI inflation rose at an annual rate of 2.9% for the year to July, the lowest reading since Q1 of 2021, bolstering market expectations of a rate cut from the Federal Reserve in September. The RBA held rates steady during the month and Australian CPI inflation moderated further, rising only 3.5% for the year to July. The Bank of England cut interest rates by 25bp, easing monetary policy for the first time since the onset of post-Covid inflation.
The ASX300 Accumulation Index gained +0.4% and A-REITs returned +0.6%. Global share markets gained 1.8% and currency-unhedged investors returns were (-1.2%), hindered by the AUD which rose sharply against the US dollar and gained against the Euro and Japanese Yen.
The Australian 2-year government bond yield declined by -0.20% to 3.67% and the Australian 10-year government bond yield fell -0.15% to 3.97%. The US 2-year government bond yield declined by -0.34% to 3.92% and the US 10-year government bond yield fell by -0.13% to close at 3.90%.
Disclaimer:
The above is intended as general market commentary only and is not intended as, and does not constitute, advice of any kind. No liability is accepted for any action taken based on the above or for any loss suffered as a result of reliance on the same.
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