Global equity markets are headed for a fourth month of gains, largely driven by hopes of a soft landing for the U.S. economy and interest rate easing. Asian equities were up overnight, with Hong Kong leading gains in the region as Chinese electric vehicle makers rallied. The Hang Seng has gained almost 2% today, driven by strong performances from EV makers BYD and Li Auto, both of which had weak earnings results earlier this week that had suppressed their share prices.
U.S. economic growth was stronger than initially reported in the second quarter, reinforcing the argument that the economy is on track for a "soft landing" and that the central bank has successfully managed to tame inflation. Output was up 3% from a year earlier during the three months to the end of June, according to the Bureau of Economic Analysis, up from an initial estimate of 2.8%. Economists had expected the rate to hold steady. In U.S. equity markets, the S&P 500 closed flat yesterday, as weakness among big tech stocks offset gains in the rest of the market.
German inflation fell more than expected in August, reaching the lowest rate since 2021 and paving the way for the European Central Bank to cut interest rates in September. The harmonized annual inflation (HICP) rate declined to 2% in August from 2.6% in the previous month. This is lower than the 2.3% forecast by economists and the lowest level since March 2021. European stocks were trading close to record highs yesterday despite the pullback in the U.S. following Nvidia’s earnings. The Stoxx 600 was up 0.6%, trading slightly below record highs seen in May. Germany’s DAX surpassed record highs, rising 0.6%, France’s CAC rose 0.8% as traders were buoyed by a reprieve for cognac producers in a trade war between Beijing and Brussels, and London’s FTSE 100 gained 0.4%.
There’s plenty of data today, with French inflation due at 7:45 a.m., European and Italian inflation later at 10:00 a.m., Indian GDP at 1:00 p.m., followed by Canadian GDP at 1:30 p.m., and finally U.S. personal income and spending also at 1:30 p.m.
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