Risk assets performed well during August with most indices reaching fresh highs. Economic data continued to be encouraging with another strong set of US nonfarm payrolls. Purchasing manager indices remain in expansionary territory. Retail sales for the US, UK and Eurozone are now back at pre-COVID-19 levels after the worst quarterly GDP declines on record for most countries.
The pandemic situation has improved notably in the US, including in former hotspots such as Arizona, Florida and Texas. Continental Europe has seen a resurgence in some countries, but no country has seen a return of large scale restrictions on a national level.
Monetary and fiscal policies remained supportive. The Federal Reserve formally announced its switch to an average inflation targeting regime with 2% average inflation targeted. The US fiscal program was partially extended by executive order as Congress continued to negotiate a new fiscal package. Australia rolled out a new assistance scheme amid the lockdown in Victoria state. Germany is considering extending its own support scheme through to 2022. Japan’s PM Abe announced his retirement on health grounds with his successor expected to continue with the same monetary and fiscal policy.
Political tensions between the US and China were still in the headlines. The US administration has mandated that Chinese start-up TikTok divest from its US operations on national security grounds; a US government undersecretary urged university endowments to divest from certain Chinese companies that could be delisted in the US by 2022, and US sanctions against Hong Kong’s leader were met with tit-for-tat Chinese sanctions against a number of US senators.
Mercer's Monthly Market Monitor provides an overview of global financial markets.
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